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Yamana Gold Inc.ANNUAL REPORT2019 DisclaimerThis report contains certain forward-looking statements and forecasts, including possible or assumed reserves and resources, production levels and rates, costs, prices, future performance or potential growth of Alkane Resources Ltd, industry growth or other trend projections. Such statements are not a guarantee of future performance and involve unknown risks and uncertainties, as well as other factors which are beyond the control of Alkane Resources Ltd. Actual results and developments may differ materially from those expressed or implied by these forward-looking statements depending on a variety of factors. Nothing in this report should be construed as either an offer to sell or a solicitation of an offer to buy or sell securities.This document has been prepared in accordance with the requirements of Australian securities laws, which may differ from the requirements of United States and other country securities laws. Unless otherwise indicated, all Ore Reserve and Mineral Resource estimates included or incorporated by reference in this document have been, and will be, prepared in accordance with the JORC classification system of the Australasian Institute of Mining, and Metallurgy and Australian Institute of Geosciences.Competent PersonsThe Mineral Resources and Ore Reserves Statement as a whole has been approved by Mr D Ian Chalmers, FAusIMM, FAIG, (Executive Director of the Company), who has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Chalmers has provided his prior written consent to the inclusion in this report of the Mineral Resources and Ore Reserves Statement in the form and context in which it appears.The information in this report that relates to the TGO Mineral Resource and Ore Reserve estimates (other than the TGO Underground Ore Reserve) is based on, and fairly represents, information which has been compiled by Mr Craig Pridmore, Geology Superintendent Tomingley Gold Operations, who is a Member of the Australasian Institute of Mining and Metallurgy and an employee of Alkane Resources Ltd. Mr Pridmore has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. The information in this report that relates to the TGO Underground Ore Reserve estimate (fully reported 4 and 11 June 2018) is based on, and fairly represents, information which has been compiled by Mr Christopher Hiller (Hiller Enterprises Pty Ltd), an independent consultant, who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Hiller has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. The information in this report that relates to the PHGP Mineral Resource estimate is based on, and fairly represents, information which has been compiled by Mr Craig Pridmore, Geology Superintendent Tomingley Gold Operations, who is a Member of the Australasian Institute of Mining and Metallurgy and an employee of Alkane Resources Ltd. Mr Pridmore has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’.The information in this report that relates to the Dubbo Project Mineral Resource estimates is based on, and fairly represents, information which has been compiled by Mr Stuart Hutchin, MIAG, and an employee of Mining One Pty Ltd. Mr Hutchin has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. The information in this report that relates to the Dubbo Project Ore Reserve estimate is based on, and fairly represents, information which has been compiled by Mr Ievan Ludjio MAusIMM (CP) and Mr Mark Van Leuven FAusIMM (CP), employees of Mining One Pty Ltd. Mr Ludjio and Mr Van Leuven have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. The information in this report that relates to Exploration Targets is extracted from the Company’s ASX announcement dated 11 August 2019. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement. Contents
Business Review
Chairman’s message
Group Overview
Major Projects and Operations
Exploration
Integrity
Financial Report
Directors’ Report
Auditor’s Independence Declaration
Consolidated Financial Statements
Notes to the Consolidated
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate
Governance Statement
2
3
4
6
14
20
24
25
46
49
53
91
92
98
99
Tenement Schedule
100
Company
Information
ACN 000 689 216
ABN 35 000 689 216
Directors
I J Gandel
N Earner
D I Chalmers
A D Lethlean
G Smith
(Non-Executive Chairman)
(Managing Director)
(Technical Director)
(Non-Executive Director)
(Non-Executive Director)
Company Secretary
D Wilkins
Registered office
and principal place of business
Ground Floor,
89 Burswood Road,
Burswood WA 6100
Telephone: 61 8 9227 5677
Facsimile: 61 8 9227 8178
Share registry
Advanced Share Registry Limited
110 Stirling Highway,
Nedlands WA 6009
Telephone: 61 8 9389 8033
Facsimile: 61 8 9262 3723
Auditor
PricewaterhouseCoopers
Brookfield Place,
125 St Georges Terrace,
Perth WA 6000
Securities exchange listings
Australian Securities Exchange (Perth)
Ordinary fully paid shares
Code: ALK
OTCMarkets – OTCQX International
American Depositary Receipts (ADR)
Code: ANLKY
Level 1 ADR Sponsor
The Bank of New York Mellon
Depositary Receipts Division
101 Barclay Street,
22W, New York NY 10286
United States of America
Internet
www.alkane.com.au
mail@alkane.com.au
BUSINESS
REVIEW
2
Alkane Resources Annual Report 2019 BUSINESS REVIEW
Chairman’s
message
As we celebrate 50 years, it is with great
pleasure I present Alkane Resources’ 2019
Annual Report. The year has seen the execution
of our enhanced gold strategy and a significant
investment in downstream metal processing
technologies to support the Dubbo Project.
Alkane was incorporated as an Australian company in 1969. It thus seems fitting that in our golden anniversary year,
we sharpened our focus on gold exploration, production and investment. This enhanced gold strategy was driven by
the high price for Australian gold and our commitment to creating value for shareholders.
We’ve centred our gold activities around one of Alkane’s key assets, the gold processing facility at Tomingley Gold
Operations (TGO), which transitioned from open cut to underground mining in the past year. We are pleased to
report the underground development is progressing on schedule and on budget. Thanks must go to our new skilled
underground development team, who have been performing exceptionally well, yet keeping safety as a high priority.
In parallel, we ramped up our nearby gold exploration activities with the view to defining additional ore resources
for processing at TGO. Promising prospects include an identified Exploration Target in the gold corridor between
Tomingley and Peak Hill, and the Peak Hill deposit originally mined by Alkane 1996-2005, which we are re-evaluating
using the latest metallurgical technologies.
The third facet of our enhanced gold strategy is strategic investment in advanced junior gold mining companies and
high-potential projects, where Alkane can contribute additional capital, expertise and operating capability. This led
Alkane to invest, in October 2018, in gold exploration company Calidus Resources, due to its excellent prospects in
Western Australia and its highly feasible development path.
Alkane has continued to seek ways to develop the Dubbo Project (rare earths, niobium, zirconium and hafnium),
which is permitted and construction-ready, pending financing. We’re closely monitoring the world environment, which
continues to change, mainly resulting from developments in China. In a global market where diversification of supply
is becoming increasingly important, the Dubbo Project represents an alternative, sustainable and long-term reliable
source of these materials that are in escalating demand.
A notable development in the past year was the significant investment in Zirconium Technology Corporation (Ziron
Tech), a South Korean company, to fund the final stages of research and feasibility of a new metallisation technology.
We believe this technology, which is both more environmentally sustainable and cost-effective than conventional
processes, potentially represents the best processing route for converting Dubbo Project materials into highly
marketable, high-purity metals.
I will add finally that, given the changing market environment, a demerger of the Dubbo Project is under
contemplation by the Board. A demerger would deliver shareholders a new technology metals company with
its own ore source (Dubbo Project) and, with appropriate funding, its own production facilities utilising developed
and emerging intellectual property. The Board will provide an update for shareholders at an appropriate time.
Once again, I extend my thanks to the entire Alkane team, including our strategic partners and consultants, along with
our many shareholders, for their ongoing support of Alkane.
Ian Gandel
Chairman
Alkane Resources
3
Alkane Resources Annual Report 2019 BUSINESS REVIEW / GROUP OVERVIEW
Group Overview
In 2019 Alkane Resources is celebrating its 50th anniversary
of incorporation as an Australian company. It has been a
golden year in more ways than one, with a sharpened focus
on gold exploration, production and investment.
About Alkane
Alkane Resources is a gold production company with
a multi-commodity exploration and development
portfolio. It is the parent entity of the Alkane Group,
which also comprises Tomingley Gold Operations,
Australian Strategic Materials and Toongi Pastoral
Company. The Group’s projects and operations are
primarily located in Central Western New South Wales
in eastern Australia.
This year marks the golden anniversary of Alkane’s
incorporation as an Australian company. Alkane is now
listed on both the ASX and OTCQX (US) and owned
by around 6,400 shareholders – including many local
investors interested in regional development.
4
Alkane has a major focus on gold exploration and
production through its subsidiary Tomingley Gold
Operations (TGO), which is an operating underground
mine that transitioned from open cut during the last
year. The Company is also undertaking major gold
exploration activities in the TGO vicinity, including
at Peak Hill Gold Mine, with the view to identifying
additional resources for processing at TGO.
The Group’s other significant development is the
construction-ready Dubbo Project, which is based
on a large in-ground resource of zirconium, hafnium,
niobium and rare earth elements. With a potential
mine life of 70+ years, the Dubbo Project has the
Alkane Resources Annual Report 2019 BUSINESS REVIEW
Strategic Priorities and Investments
In a strong market for Australian gold, Alkane focused
on gold production, exploration and partnerships
during the 2018-2019 financial year. This emphasis on
gold has been driven by the Company’s commitment
to creating value for shareholders and the need to
wait for market conditions that will support progress
of the Dubbo Project.
Alkane’s gold strategy is soundly based on existing
gold assets, established projects, promising prospects,
and demonstrated experience in gold exploration and
production. The strategy is largely centred around
maximising the value of the gold processing facility
at Tomingley Gold Operations (TGO) and includes:
• Progression of underground mining at TGO
• Regional gold exploration to define additional ore
resources for processing at TGO, and
• Re-evaluation of the Peak Hill deposit to determine
whether it is feasible to access defined ore
resources as another source of ore for the TGO
processing plant.
Our gold focus has been driven
by high Australian gold prices
and Alkane’s commitment to
creating value for shareholders
while waiting for the right
market conditions to support
the Dubbo Project.
The Company is also seeking strategic investments
in junior gold mining companies and high-potential
projects, where Alkane can contribute additional
capital, expertise and operating capability, for mutual
benefit. In October 2018, Alkane invested in gold
exploration company Calidus Resources Limited
(ASX:CAI), due to its excellent prospects in Western
Australia and its highly feasible development path.
Alkane continues to seek ways to develop the
Dubbo Project, which is construction-ready pending
financing. Australian Strategic Materials (ASM) is
monitoring market demand for these critical materials
and will seek further investment for the project when
the market conditions are right.
5
potential to become a significant global producer of
these critical materials used in many future industries
and sustainable technologies. The project is owned
by Alkane subsidiary Australian Strategic Materials
(ASM), which is monitoring market demand and will
seek further investment for this project when the
time is right.
The wellbeing and resilience of local communities
is extremely important to Alkane, which strives
to leave a positive legacy by creating permanent
infrastructure, offering training and employment,
preferring local service providers and supporting
local causes and events. As the first link in a
sustainable supply chain, Alkane upholds stringent
social and environmental standards for the mining
and processing of its products. Through the Toongi
Pastoral Company, Alkane is proud to demonstrate
that mining, farming, land management and nature
conservation can co-exist in harmony with the local
community.
Alkane Resources Annual Report 2019 BUSINESS REVIEW / MAJOR PROJECTS AND OPERATIONS
Major Projects
and Operations
It was a pivotal year at Alkane’s Tomingley Gold
Operations, where open cut mining stopped and
underground development started, continuing the
life of the gold processing operation. Alkane also
continues to seek funding to develop the
multi-commodity Dubbo Project, which stands
ready for construction when the time is right.
Tomingley Gold Operations
Tomingley Gold Operations (TGO) is a wholly owned
subsidiary of Alkane, located near the village of
Tomingley, approximately 50 kilometres southwest of
Dubbo in Central Western New South Wales. The gold
processing plant was commissioned in January 2014
and has been operating at the design capacity
of 1Mtpa since late May 2014.
Open cut mining at TGO commenced in 2014,
based on four gold deposits: Wyoming One, Wyoming
Three, Caloma One and Caloma Two.
6
Following the completion of the Wyoming Three
and Caloma One open cuts in 2015 and 2017
respectively, mining in the Wyoming One and Caloma
Two open cuts ceased in the 2019 financial year.
An underground mine is under development at the
Wyoming One deposit, with stope ore extraction
anticipated later in 2019.
Alkane is also undertaking major gold exploration
activities in the gold corridor between Tomingley
and Peak Hill as part of a project to identify additional
resources for processing at TGO.
Alkane Resources Annual Report 2019 Total gold poured in FY2019
Total gold sold in FY2019
BUSINESS REVIEW
48,969 ounces
at an All in Sustaining
Cost (AISC)* of A$947/oz
52,068 ounces
at an average of
A$1,777 per ounce
*All in Sustaining Cost (AISC) comprises all site operating costs, royalties, mine exploration, sustaining capex and mine
development and an allocation of corporate costs, presented on the basis of ounces produced.
Production
Underground mining development
The operation continued to perform very well as
open cut mining wound to a close: mining in the
Wyoming One open cut finished in December 2018
and in Caloma Two in January 2019. Medium and
low-grade ore stockpiles were then processed for
the balance of the financial year, enabling gold
production to continue at the design feed rate of
1Mtpa. Once processing of low-grade stockpiles is
finished, gold production will revert to underground
ore, most likely in early 2020.
Alkane’s Board approved the development of
underground operations in September 2018.
These works commenced in January 2019 and
continue on schedule and on budget. The main
portal is located at the base of the Wyoming One
open cut, with the decline spiralling down outside
the ore zone past several ore levels. Production of ore
from the first underground stope is scheduled before
the end of calendar year 2019. TGO has recruited a
team of experienced personnel in preparation for
underground ore production. The original mine plan
is to extract 1.24Mt of ore with grading 2.7g/t gold,
for a resultant 108,000 ounces of gold. Alkane is
optimistic about the potential to extend this further.
7
Alkane Resources Annual Report 2019 BUSINESS REVIEW / MAJOR PROJECTS AND OPERATIONS
Mineral Resources and Ore Reserves
The Company reports Ore Reserves and Mineral Resources for TGO as at 30 June 2019 in accordance with the 2012
edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC 2012).
These estimates take into account ore depleted by mining during the 2019 financial year and were reported to the ASX
on 23 September 2019. Any differences to those tables are corrections to typographical errors; the assumptions and
parameters detailed in that report are unchanged. Mineral Resources are wholly inclusive of Ore Reserves.
TGO Mineral Resources (as at 30 June 2019)
Deposit
Measured
Indicated
Inferred
Total
Tonnage
(Kt)
Grade
(g/t Au)
Tonnage
(Kt)
Grade
(g/t Au)
Tonnage
(Kt)
Grade
(g/t Au)
Tonnage
(Kt)
Grade
(g/t Au)
Total Gold
(Koz)
Open Pittable Resources (cut off 0.50g/t Au)
Wyoming One
Wyoming Three
Caloma
Caloma Two
Sub Total
184
86
895
64
1,229
1.5
2.0
1.6
2.3
1.6
982
16
1,016
812
2,826
Underground Resources (cut off 2.50g/t Au)
Wyoming One
Wyoming Three
Caloma
Caloma Two
Sub Total
Total
0
10
78
-
88
1,317
0
3.6
3.8
0
3.8
1.8
787
6
32
218
1,043
3,869
1.7
1.3
1.2
2.0
1.6
4.0
3.1
3.4
3.6
3.9
2.2
Apparent arithmetic inconsistencies are due to rounding.
TGO Ore Reserves (as at 30 June 2019)
137
33
824
26
1,020
109
4
44
76
233
1,253
0.7
1.4
1.2
1.4
1.2
3.2
3.1
3.0
3.2
3.2
1.5
1,303
135
2,735
902
5,075
896
20
154
294
1,364
6,439
1.6
1.7
1.3
2.0
1.5
3.9
3.4
3.5
3.5
3.8
2.0
60
8
116
58
242
113
2
17
33
165
407
Deposit
Proved
Probable
Total
Tonnage
(Kt)
Grade
(g/t Au)
Tonnage
(Kt)
Grade
(g/t Au)
Tonnage
(Kt)
Grade
(g/t Au)
Total Gold
(Koz)
Open Pittable Resources (cut off 0.50g/t Au)
Wyoming One
Wyoming Three
Caloma
Caloma Two
Stockpiles
Sub Total
0
0
0
0
677
677
0
0
0
0
0.7
0.7
0
0
0
0
0
0
Underground Resources (cut off 2.50g/t Au)
TGO underground 45
Sub Total
Total
45
722
2.7
2.7
1.8
688
688
688
0
0
0
0
0
1.7
3.2
3.2
1.9
0
0
0
0
677
677
732
732
1,409
0
0
0
0
0.7
0.7
3.1
3.1
2.0
0
0
0
0
15
15
74
74
89
Apparent arithmetic inconsistencies are due to rounding.
8
Alkane Resources Annual Report 2019 BUSINESS REVIEW
The tables below compare the total TGO Mineral Resources and Ore Reserves as at 30 June 2019 year
on year with 30 June 2018.
TGO Comparative Mineral Resources (30 June 2018 to 30 June 2019)
Deposit
Open Pittable
Wyoming One
Wyoming Three
Caloma
Caloma Two
Total
Underground
Wyoming One
Wyoming Three
Caloma
Caloma Two
Total
2018
2019
Tonnage
(Kt)
Grade
(g/t Au)
Gold (koz)
Tonnage
(Kt)
Grade
(g/t Au)
Gold (koz)
1,538
135
2,735
921
5,329
976
20
164
294
1,454
1.60
1.74
1.32
1.98
1.5
3.9
3.4
3.5
3.5
3.8
79
8
116
59
262
122
2
18
33
175
1,303
135
2,735
902
5,075
896
20
154
294
1,364
1.6
1.7
1.3
2.0
1.5
3.9
3.4
3.5
3.5
3.8
60
8
116
58
242
113
2
17
33
165
Apparent arithmetic inconsistencies are due to rounding.
TGO Comparative Ore Reserves (30 June 2018 to 30 June 2019)
Deposit
Open Pittable
Wyoming One
Wyoming Three
Caloma
Caloma Two
Stockpiles
Total
Underground
TGO Underground
Total
2018
2019
Tonnage
(Kt)
Grade
(g/t Au)
Gold (koz)
Tonnage
(Kt)
Grade
(g/t Au)
Gold (koz)
197
0
0
20
1,257
1,474
732
732
1.7
0.0
0.0
1.8
1.0
1.1
3.1
3.1
11
0
0
2
39
52
74
74
0
0
0
0
677
677
732
732
0.0
0.0
0.0
0.0
0.7
0.7
3.1
3.1
0
0
0
0
15
15
74
74
Apparent arithmetic inconsistencies are due to rounding.
The primary differences from 2018 to 2019 are:
• Ore mined from Caloma Two and Wyoming One during the period
• Open pit mining now complete
9
Alkane Resources Annual Report 2019
BUSINESS REVIEW / MAJOR PROJECTS AND OPERATIONS
Dubbo Project
The Dubbo Project is a large in-ground polymetallic
resource of the metals zirconium, hafnium, niobium,
tantalum, yttrium and rare earth elements. It is
located near the village of Toongi, 25 kilometres south
of Dubbo in Central Western New South Wales.
Australian Strategic Materials (ASM), a wholly owned
subsidiary of Alkane, intends to develop the Dubbo
Project to supply globally significant quantities
of zirconium and rare earth materials, as well as
contribute to the niobium and emerging hafnium
industries. These materials are in high demand for
a range of existing and future technologies – in
particular clean energy and transportation, where
they are used in high volumes.
In a global market where diversification of supply is
becoming increasingly important, the Dubbo Project
represents an alternative, sustainable and reliable
source of these critical materials.
Global companies using these materials are actively
seeking alternative sources to combat growing
tariffs and supply uncertainties from China, which
currently produces more than 75 per cent of the
world’s zirconium and over 90 per cent of high-value
rare earth elements. Supply of hafnium, meanwhile,
is limited in volume and highly dependent on a
few manufacturers in the nuclear industry. With a
mine life potential of 75+ years, the Dubbo Project
is gaining interest as an important potential source
of supply to meet escalating demand and decrease
supply chain risks.
Project status
The Dubbo Project is ready for construction,
subject to financing. Australian Strategic Materials
owns 3,456 hectares of land at Toongi, encompassing
the mineral deposit and land required for materials
processing. All other major state and federal
approvals and licences are in place, along with an
established process flowsheet and a solid business
case. A substantial body of engineering and process
development work has given Alkane and ASM a high
degree of confidence for project execution, with
either a staged or full build feasible, depending on
the level of offtake contracts obtained.
The Dubbo Project will produce a suite of high-
value downstream zirconium, hafnium, rare earth
and niobium products used in a range of advanced
technologies worldwide. The initial product range will
be complemented by the progressive development of
further high-value products in response to customer
and market demands. In the past year, ASM
and its sales and marketing partners have
continued to engage with interested companies
across the world, seeking to convert existing
Memoranda of Understanding and Letters of Intent
into offtake agreements.
1010
Alkane Resources Annual Report 2019 Market conditions
Zirconium
The Dubbo Project will produce a mix of ‘base’ and
‘premium’ zirconium products, including zirconium
oxychloride (ZOC), zirconium basic carbonate (ZBC)
and zirconium oxide (zirconia) at a range of purities.
Market prices for zirconium products remained
relatively stable in the 2019 financial year, after
rapid rises the previous year driven primarily by
supply disruptions from China. Prices for ZOC, being
the primary precursor for high-value downstream
zirconium products, remained in the range
US$2,350-2,500/t FOB China (US$6.7 – 6.9/kg ZrO2
equivalent). The price of zircon, being the primary
raw material for zirconium products, levelled out at
around US$1,500-1,650/t, after essentially doubling
over the preceding two years. However, uncertain
zircon supply is expected to drive up ZOC prices over
the next financial year.
Hafnium
Current global supply of hafnium is limited to
approximately 70tpa and lies in the hands of a few
companies producing nuclear-grade zirconium
metal. This makes the hafnium market one of the
smallest markets for minor metals, but demand is
poised to outstrip production, primarily driven by its
growing use in superalloys. Prices for hafnium metal
(max 1% Zr) rose by more than 10 per cent over the
year, caused by both increased demand and the
implementation of higher US tariffs on products from
China. ASM intends to produce hafnium according to
market demand, but the Dubbo Project will have the
capability to supply in excess of 100tpa.
Rare Earths
Rare earth permanent magnets (REPM) are the
main driver for the global rare earths industry at
present, accounting for 30 per cent of the market
by volume – but 80 per cent by value. This is largely
due to the rapid growth in global demand for electric
vehicles that, coupled with reduced supply from
China, could lead to global shortages. The market
for magnet rare earths materials (neodymium,
praseodymium, samarium, dysprosium and terbium)
was also affected over the past year by USA-China
trade tensions. Prices for praseodymium/neodymium
mischmetal initially weakened, before bouncing back
in June 2019. However, prices for the heavy rare
earth metals dysprosium and terbium strengthened.
It is anticipated that strong growth in demand for
neodymium, praseodymium, dysprosium and terbium
oxides will drive strong prices over the first 20 years
of the Dubbo Project.
BUSINESS REVIEW
Niobium
The Dubbo Project will produce ferro-niobium via
a joint venture with Treibacher Industrie AG (TIAG).
The global steel industry is the main driver for
niobium consumption, where 90 per cent of all
niobium is used as ferro-niobium for high strength
low alloy (HSLA) steels for the construction and
automotive sectors. The market is dominated
by Brazil’s Companhia Brasileira de Metalurgia e
Mineração (CBMM), with approximately 80 per cent
of ferro-niobium supply. The niobium market has
historically been stable, but in the 2019 financial
year prices rose substantially as steel manufacturers
sought to use niobium in place of vanadium, which is
facing short supply. However, by the end of June 2019
niobium prices slipped back in response to a large
fall in vanadium prices and are likely to continue
levelling out.
1111
BUSINESS REVIEW / MAJOR PROJECTS AND OPERATIONS
Investment in clean
metal processing
technology
Several of the Dubbo Project elements – including
hafnium and the high-value rare earth magnet
metals neodymium and praseodymium – are highly
marketable in metallic form. ASM has been exploring
potential downstream metal conversion technologies
for the past several years and recently announced
a significant step towards establishing a processing
route for converting Dubbo Project materials into
high-purity metals.
In June 2019, the Company entered into a
binding agreement with Zirconium Technology
Corporation (Ziron Tech), a South Korean company,
to fund the final stages of research and feasibility
of a new metallisation technology developed by
scientists at Chungnam National University (CNU)
in Daejon, South Korea. The innovative technology
promises to replace highly energy-intensive
conventional processes, in wide use since the 1940s,
with a more environmentally sustainable and cost-
effective alternative.
12
12
Under the agreement, ASM invested US$1.2m
towards a pilot plant located at CNU and will
supply Dubbo Project metallic oxide samples for
processing. The Company has exclusive global rights
to commercialise the technology for zirconium and
hafnium under licence. A secondary objective is to
work collaboratively with Ziron Tech to commercialise
and maintain exclusive rights over the technology for
other elements, ultimately creating passive income
streams through licensing and royalty arrangements.
Commercial plants based on this technology would
enable ASM to bypass traditional supply chains and
market high-purity rare earth metals, nuclear and
industrial-grade zirconium metal, and high-purity
hafnium metal directly to global customers.
The technology is theoretically applicable to all
18 elements produced by the Dubbo Project, with
potentially up to 75 per cent of revenue from metals.
This investment represents the final significant outlay
expected by ASM prior to project financing being
achieved and has facilitated offtake discussions with
a number of South Korean industrial companies.
Alkane Resources Annual Report 2019 BUSINESS REVIEW
Mineral Resources and Ore Reserves
As at 30 June 2019, the Mineral Resources and Ore Reserves for the Toongi deposit, which is the basis of the Dubbo
Project, are the same as those stated at 30 June 2018. These estimates were provided by independent industry
consultants Mining One Pty Ltd and are reported by Alkane in accordance with the 2012 edition of the Australasian
Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC 2012). Mineral Resources
are wholly inclusive of Ore Reserves, which are based on economic parameters applied to the Mineral Resources,
reflecting an initial project horizon of 20 years.
Dubbo Project Mineral Resources (as at 30 June 2019)
Resource Category
Tonnes (Mt)
ZrO2 (%)
HfO2 (%)
Nb2O5 (%)
Ta2O5 (%)
Y2O3 (%)
TREO*(%)
Measured
Inferred
Total
42.81
32.37
75.18
1.89
1.90
1.89
0.04
0.04
0.04
0.45
0.44
0.44
0.03
0.03
0.03
0.14
0.14
0.14
0.74
0.74
0.74
*TREO% is the sum of all rare earth oxides excluding ZrO2, HfO2, Nb2O3, Ta2O5, Y2O3
Dubbo Project Ore Reserves (as at 30 June 2019)
Reserve Category
Tonnes (Mt)
ZrO2 (%)
HfO2 (%)
Nb2O5 (%)
Ta2O5 (%)
Y2O3 (%)
TREO*(%)
Proved
Total
18.90
18.90
1.85
1.85
0.04
0.04
0.440
0.440
0.029
0.029
0.136
0.136
0.735
0.735
*TREO% is the sum of all rare earth oxides excluding ZrO2, HfO2, Nb2O3, Ta2O5, Y2O3
1313
BUSINESS REVIEW / EXPLORATION
Exploration
Alkane maintained its multi-commodity exploration
and evaluation effort in the Central West of New South Wales.
Given the strong Australian gold price, the Company focused on
gold exploration adjacent to its Tomingley Gold Operations, which
transitioned from open pit to underground mining during the year.
An Exploration Target was identified within the Tomingley Gold
Project, leading to the commencement of an extensive resource
definition drilling program.
Tomingley Gold Project (gold)
Alkane Resources Ltd 100%
Alkane’s Tomingley Gold Project covers an area of
approximately 440 square kilometres, stretching 60
kilometres north-south along the Newell Highway in
Central Western New South Wales. The prospective
belt extends from near the village of Tomingley in
the north (about 50 kilometres southwest of Dubbo),
through Peak Hill and almost to Parkes in the south.
The project incorporates the Company’s currently
active Tomingley Gold Operations (TGO) and the
inactive Peak Hill Gold Mine.
14
Alkane Resources Annual Report 2019 Exploration Target defined
Over the past year, Alkane has conducted an extensive
regional exploration program, with the objective of
defining additional resources that have the potential
to be mined via either open pit or underground
operations and supplied to the processing centre
at TGO.
The results of the 2018-2019 drilling program, which
comprised 76 holes for 16,376 metres of reverse
circulation (RC) drilling and three holes for 1,143
metres of diamond core drilling, were released in
a series of ASX announcements (11 July 2018, 19
October 2018, 1 February 2019, 29 March 2019,
17 May 2019, 12 June 2019). The drilling, focused
on the Roswell, El Paso and San Antonio prospects,
yielded broad, shallow, high-grade intercepts that
demonstrate potential for mine development,
pending resource confirmation, landholder
agreement and regulatory approvals.
Alkane announced in July 2019 that it has defined
an Exploration Target of approximately 15.8 to
23.8 million tonnes at a grade ranging between
1.7 to 2.2g/t gold across the three primary
BUSINESS REVIEW
prospects – Roswell, El Paso and San Antonio. The
potential quantity and grade of the Exploration
Target is conceptual in nature and therefore is an
approximation. There has as yet been insufficient
exploration to estimate a Mineral Resource and it
is uncertain if further exploration will result in the
estimation of a Mineral Resource. The Exploration
Target has been prepared and reported in accordance
with the 2012 edition of the JORC Code.
Resource definition drilling commenced in early
July 2019 and Alkane has commenced preliminary
investigations to establish a conceptual overview of
open cut and underground options for the project,
should an adequate resource be defined. Since
the Exploration Target lies within eight kilometres
of Alkane’s existing operations at TGO, this close
proximity, coupled with similar geology to the Caloma
and Wyoming deposits, highlights the potential to
significantly increase the resource around TGO and
extend the life of the operation.
Peak Hill Gold Project
Alkane is also exploring the potential for a mining operation at the Peak Hill Gold Mine, which the Company operated
1996-2005. Technological advances and gold price increases in the last two decades have made the economics of
further development worth re-evaluating as additional feedstock for the nearby TGO processing facility. A revised
Mineral Resource (JORC 2012), completed in October 2018, identified an initial Inferred Resource of 108,000 ounces
of gold.
In January 2019, 10 diamond cores were extracted from the western edge of the rehabilitated Proprietary open cut,
angled below historic underground workings. Advanced metallurgical testing is underway to establish whether the ore
can be pre-treated to allow processing at TGO. Alkane retains its Mining Lease and Environment Protection Licence
for Peak Hill Gold Mine, but any further mine development would require further environmental assessment and
government approval.
Peak Hill Mineral Resources (as at 30 June 2019)
Deposit
Proprietary
Underground
Total
Resource
Category
Cut-Off
Tonnes (Mt)
Gold Grade
(g/t)
Gold Metal
(Koz)
Copper Metal
(%)
Inferred
2g/t Au
1.02
1.02
3.29
3.29
108
108
0.15
0.15
The Mineral Resource estimate was initially completed in October 2018, so the Peak Hill Mineral Resources as at June
2018 were nil.
15
Alkane Resources Annual Report 2019
BUSINESS REVIEW / EXPLORATION
32˚S
Caloma
Wyoming
Myalls United
McLeans
Roswell
San Antonio
El Paso
Smiths
Cemetery
Peak Hill
Mineral
Hill
Syerston
148˚E
Trangie
TGO
Dubbo
Finns
Crossing
150˚E
Bodangora
Kaiser
Wellington
Burrendong
Dam
DP
Tomingley
TGO
Peak Hill
Northparkes
Parkes
Armstrongs
Orange
Forbes
Cudal
Cadia Valley
Orange
East
To Sydney
West
Wyalong
Cowal
34˚S
Central
West NSW
W
N
S
E
Rockley
Elsienora
0
kilometres
100
The Alkane Group’s projects and operations are primarily located in the vicinity of Dubbo in Central
Western New South Wales. Of particular note is the gold corridor running north-south between Tomingley
and Peak Hill (see inset), which includes the key primary prospects of Roswell, El Paso and San Antonio.
Mineral Resource and Ore Reserve Governance and Internal Controls
The Alkane Group has put governance arrangements and internal controls with respect to its estimates of Mineral
Resources and Ore Reserves and the estimation process within the Tomingley Gold Operations, Dubbo Project and
exploration and evaluation projects such as the Peak Hill Gold Project, including:
• oversight and approval of each annual statement by the Technical Director;
• establishment of internal procedures and controls to meet JORC Code 2012 compliance in all external reporting;
• independent review of new and materially changed estimates;
• annual reconciliation with internal planning to validate reserve estimates for operating mines; and
• Board approval of new and materially changed estimates.
16
16
Alkane Resources Annual Report 2019
Alkane Resources Annual Report 2019 BUSINESS REVIEW
Northern Molong Porphyry Project (gold-copper)
Alkane Resources Ltd 100%
Encompassing three exploration licences (Bodangora, Kaiser and Finns Crossing), the Northern Molong Porphyry
Project covers an area of 110 square kilometres, centred about 20 kilometres north of Wellington and about 35
kilometres east of Dubbo. The project covers a large portion of the northern Molong Volcanic Belt, which is highly
prospective for alkali porphyry-related mineralisation similar to the Cadia Valley deposits near Orange.
A drill program comprising several diamond core and RC drill holes took place at the Glen Hollow, Kaiser and Boda
porphyry gold-copper prospects in May-August 2019. The results were announced to the ASX 9 September 2019.
Rockley (gold)
Alkane Resources Ltd 100%
The Rockley Project, located 35 kilometres southeast of Blayney, is considered prospective for McPhillamys style gold
mineralisation. Geological mapping, a high-resolution ground magnetic survey and a soil chemistry survey highlighted
a gold multi-element anomaly around the historic Rosedale workings. A drilling program is being considered.
Cudal (gold-zinc)
Alkane Resources Ltd 100%
Cudal is located 20 kilometres northwest of the Cadia Valley Operations of Newcrest Mining Ltd. Preliminary geological
mapping and high-resolution ground magnetics were completed to assist with drilling target definition. The Company
continues actively seeking joint venture partners for this tenement.
17
Alkane Resources Annual Report 2019 BUSINESS REVIEW / EXPLORATION
Elsienora (gold)
Alkane Resources Ltd 100%
The Elsienora tenements are located 75 kilometres south of Blayney and are considered prospective for orogenic style
gold mineralisation and volcanic hosted gold and base metal mineralisation. No field activity took place during the year.
Wellington (gold-copper)
Alkane Resources Ltd 100%
The Wellington Project hosts Galwadgere, a small copper-gold deposit with volcanogenic massive sulphide-type
characteristics. No field activity took place during the year.
Orange East Project (gold-copper)
Alkane Resources Ltd earning 80%
The Orange East Project is located approximately 15 kilometres east-southeast of Orange and consists of one
exploration licence covering approximately 45 square kilometres. The project area hosts the historic Carangara
copper workings at Byng (1850 to 1875); however, the most compelling exploration target is at the Gunnarbee
prospect, where a multi-element soil geochemical anomaly, with a similar elemental suite to the surface anomaly at
McPhillamys, has been outlined over an area of 1000 metres by 500 metres. No field activity took place during the
year with land access arrangements under discussion.
18
Alkane Resources Annual Report 2019 BUSINESS REVIEW
Armstrongs (gold)
Alkane Resources Ltd 100%
Located west of Parkes, this prospect has similar geology to the TGO site and historic drilling has identified low-grade
gold mineralisation over a 400 metre strike length. The available historic data is being reviewed and evaluated for
economic potential.
Trangie (nickel-copper, cobalt, titanium and rare earths)
Alkane Resources Ltd 100%
The exploration licence targets a geophysical anomaly discovered by state aerial and ground surveys, featuring geology
atypical for the region, located approximately five kilometres east of Trangie township. It is considered a prospect for a
number of metals, including nickel, copper, cobalt, titanium and rare earths.
A drilling program of 45 aircore holes, totalling 3,242 metres, was undertaken in a ‘cross’ pattern over the magnetic
anomaly. Confirmation of the bedrock is still to be determined. The results have been received, with analysis and
interpretation still underway.
Leinster Region Joint Venture (nickel-gold)
Alkane Resources Ltd 19.4% diluting
Alkane has a diluting 19.4 per cent interest in this Western Australian nickel-gold exploration venture (Miranda and
McDonough tenements). The remaining share is held by Australian Nickel Investments Pty Ltd (ANI, a subsidiary of
Western Areas Ltd). ANI reported no ground exploration completed during the year.
19
Alkane Resources Annual Report 2019 BUSINESS REVIEW / INTEGRITY
Integrity
Alkane strives to deliver strong environmental and social
performance across all activities, with the aim of leaving a
lasting positive legacy for local communities and the land alike.
The Company is committed to safe environmental practices
and improving biodiversity, assisting regional communities
to flourish and become more resilient, and providing a safe
and rewarding working environment for employees.
Sustainable Supply Chain
Alkane understands the importance placed on the
sustainable and ethical sourcing of raw materials.
As the first link in a sustainable supply chain, Alkane
upholds stringent social and environmental standards
for all its activities.
Alkane is diligent about ensuring the conditions
for its workforce meet international occupational
health and safety standards, with no exploitation or
child labour. This includes the employees of marketing
and offtake partners in Australia and overseas. The
Company has comprehensive systems of control and
accountability and administers corporate governance
with openness and integrity based on the principles
and recommendations of the ASX Corporate
Governance Council.
20
Alkane Resources Annual Report 2019 BUSINESS REVIEW
Environmental Management
Alkane’s exploration, mining, processing and
rehabilitation activities are carefully designed with
the smallest practical environmental footprint in
mind. The Company also focuses on protecting,
nurturing and enhancing local biodiversity, as well
as progressive land rehabilitation to ensure sites are
returned to stable and productive ecosystems once
mining is finished.
Sensitive design and rehabilitation
Before any soil is turned on site, Alkane is already
thinking about rehabilitation. The Company aims to
restore sites to stable functioning and productive
ecosystems. This is achieved through sensitive design,
creation of biodiversity offset areas, progressive
rehabilitation, monitoring and management actions.
Sensitive design involves designing (and redesigning)
for small physical footprint, low volumes of power,
water and other consumables, water recycling, and
rigorous waste residue treatment and storage to
minimise impact to the environment. Progressive
rehabilitation of mining landforms commences in the
early days of operation and continues for the life of
the mine and beyond.
At Peak Hill Gold Mine (in operation 1996 to 2005), a
natural bushland setting frames the five rehabilitated
mining voids, which are now open to the public as
part of a Tourist Mine. Progressive rehabilitation
of the waste rock landforms at Tomingley Gold
Operations has been underway since mining
commenced, with final shaping and revegetation near
to completion in 2019.
Encouraging biodiversity
The establishment and care of biodiversity
offset areas forms an important part of Alkane’s
commitment to the environment and the community.
These designated areas are earmarked for the
restoration and creation of new native habitats for
animal species, especially those that are threatened
and endangered.
At both Tomingley Gold Operations and the Dubbo
Project, these biodiversity offset areas are protected
by binding Conservation Property Vegetation Plans,
signed in agreement with regional Local Land Services
organisations. Activities include re-vegetation
and protection of native species from introduced
predators. At Peak Hill Gold Mine, the Company’s
rehabilitation efforts have resulted in an increasingly
species-rich site, with several native bird and mammal
species, not present pre-mining, now thriving.
21
Most of Alkane’s products from the Dubbo Project
will be manufactured to customer specifications at
Australian Strategic Materials’ planned operations in
Australia or via an exclusive toll processing partner.
This simplified and direct supply chain will bypass
China, making it highly sustainable, cost-effective
and easily traceable.
Alkane Resources Annual Report 2019 BUSINESS REVIEW / INTEGRITY
Integrated farming and conservation
Alkane has taken a unique approach towards
conservation and land management with the
establishment of the wholly owned Toongi Pastoral
Company in 2016. Operating as a productive mixed
farm, Toongi Pastoral Company manages the
agricultural land, farm assets and biodiversity offset
areas associated with the Dubbo Project – a total
of approximately 3500 hectares. This integrated
approach to farming and conservation ensures
effective and efficient land management, and provides
the foundation for positive social, environmental and
financial outcomes. Alkane is proud to demonstrate
that mining, farming and nature conservation can
co-exist in harmony with the local community.
Community
Alkane is an active and engaged member of the
communities in which it operates – in particular
the Narromine Shire, Parkes Shire and Dubbo
Regional Council local government areas in Central
Western New South Wales. The Company aims
to support the development of more resilient
regional communities through the establishment of
permanent infrastructure, sponsorship of local events
and organisations, provision of training and career
opportunities to local students and residents,
and the creation of local economic opportunities for
service providers.
Alkane maintains strong relationships with
local communities through clear and regular
communications about its operations and
development activities, and actively participates on
Community Consultative Committees. The Company
encourages community engagement and participates
regularly at regional events to discuss the Group’s
projects. Several groups visited Alkane’s sites in
Central Western New South Wales during the year,
including potential foreign investors and university
students looking at environmental management and
mine site rehabilitation.
22
22
Employees
Alkane is committed to employing members of
the local community where possible. Since the
Company does not support a ‘fly-in/fly-out’ scheme,
the majority of employees live in the local area.
The 2019 financial year saw a fluctuation of
employees at Tomingley Gold Operations due to the
winding down and ultimate cessation of open cut
mining, followed by the ramp-up of underground
operations and employment of an associated skilled
underground workforce.
At financial year end, the Group had 105 personnel
on the payroll, with 16 per cent being female. A total
of 85.4 full-time equivalent contractors were on site
at TGO in June 2019. Achieving a good gender balance
in such an historically male-dominated industry is a
challenge essential to maintaining a culture of
equal opportunity.
Alkane Resources Annual Report 2019 BUSINESS REVIEW
Work health and safety
Alkane’s personnel are distributed across several
office locations and operations across Central
Western New South Wales (Orange, Dubbo, Peak
Hill and Tomingley), Sydney and Perth. The largest
concentration of employees is at TGO, located at
Tomingley, southwest of Dubbo.
The TGO Mine Safety Management and Operations
Management systems are in place, with both
subjected to a rigorous auditing and inspection
regime to ensure their integrity. A thorough employee
safety induction program is used to on-board all
employees and contractors at the TGO site to ensure
safe operations at all times.
As for Alkane’s other sites, a full-time site
supervisor maintains the Peak Hill Gold Mine leases
and infrastructure during decommissioning. The
facilities at the mine site also provide support for
exploration activities at the nearby Tomingley Gold
Project, which encompasses TGO. Alkane also
maintains exploration offices in Dubbo and Orange
to service the Group’s other tenements in Central
Western New South Wales.
During the reporting period, one injury resulting in
lost time occurred at TGO, and two injuries required
restricted work. There were no injuries requiring
medical treatment. For the 2019 financial year, TGO
had a total recordable injury frequency rate (TRIFR)
of 2.49 per 200,000 hours worked and a TRIFR of
12.45 per 1,000,000 hours worked.
TGO reported no dust exceedances that were
attributable to mine operations during the year.
However, due to the ongoing drought conditions in
Central Western New South Wales, dust levels in the
region have often exceeded the approved limits.
TGO informs the NSW Environment Protection Agency
(EPA) and other government agencies when this
situation occurs and provides supporting weather
data and field observations as required. No noise
exceedances were recorded during the year.
Alkane reported two incidents to the New South
Wales EPA in October and December 2018. Both
incidents involved a minor failure of the separation
wall between the external (clean) and internal water
drains, resulting in small volumes of silt-laden water
being discharged from site. TGO received an official
caution from the EPA and completed extensive
remediation and repair activities to prevent this
reoccurring. No environmental harm was identified.
23
Work Health and Safety Review
Alkane complies with all laws and regulations
in relation to the environment and work health
and safety (WHS). The Company strives for
continuous improvement of its standards for
Tomingley Gold Operations, the Peak Hill Gold Mine
decommissioning and closure, and for ongoing
exploration and mine development.
Risk management
Alkane is committed to the active management of
risks to its operations and has a Risk Management
Committee composed of directors and management
to assist the Managing Director to identify, assess,
monitor and manage the Company’s risks.
The Company’s Risk Management Coordinator
is tasked with the responsibility of keeping the
risk management policy, framework and registers
updated, subject to formal approval of policy
amendments by the Board.
TGO continues to monitor and audit critical controls
as part of its ongoing risk management process.
A specialised software package assists with the
management of the complexities for the high-level
risks. Risk workshops have been held to identify risks
that need to be addressed in the design stage of the
Dubbo Project.
Alkane Resources Annual Report 2019 FINANCIAL
REPORT
Alkane’s Board of Directors (left to right): Anthony Dean Lethlean (Non-Executive Director), Ian Jeffrey Gandel
(Chairman), Gavin Smith (Non-Executive Director), Nicholas Paul Earner (Managing Director), David Ian Chalmers
(Technical Director), Dennis Wilkins (Company Secretary).
24
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Directors’ Report
The Directors present their report, together with the financial statements,
on the consolidated entity (referred to hereafter as the ‘consolidated entity’
or the ‘Group’) consisting of Alkane Resources Ltd (referred to hereafter as
the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of,
or during, the year ended 30 June 2019.
Directors
The following persons were Directors of Alkane Resources Ltd during the whole of the financial year and up to the date
of this report, unless otherwise stated:
I J Gandel
N P Earner
D I Chalmers
A D Lethlean
G M Smith
The Board continues its efforts to seek to appoint additional independent members who will bring complementary skill
sets and diversity to the Group’s leadership.
Information on Directors
Ian Jeffrey Gandel – Non-Executive Chairman
LLB, BEc, FCPA, FAICD
Appointed Director 24 July 2006 and Chairman 1 September 2017.
Mr Gandel is a successful Melbourne-based businessman with extensive experience in retail management and retail
property. He has been a director of the Gandel Retail Trust and has had an involvement in the construction and leasing
of Gandel shopping centres. He has previously been involved in the Priceline retail chain and the CEO chain of serviced
offices.
Mr Gandel has been an investor in the mining industry since 1994. Mr Gandel is currently a substantial holder in a
number of publicly listed Australian companies and, through his private investment vehicles, now holds and explores
tenements in his own right in Western Australia. Mr Gandel is currently non-executive chairman of Alliance Resources
Ltd (appointed as a director on 15 October 2003 and in June 2016 was appointed non-executive chairman). He is also
non-executive chairman of Octagonal Resources Ltd (appointed 10 November 2010). (This company sought delisting
from the ASX in February 2016 and converted to Pty Ltd status in April 2016.)
Mr Gandel is a member of the Audit Committee and Chairman of the Remuneration and Nomination Committees.
25
Alkane Resources Annual Report 2019
DIRECTORS’ REPORT/DIRECTORS
Nicholas Paul Earner – Managing Director
BEng (hons)
Appointed Managing Director 1 September 2017.
Mr Earner is a chemical engineer and a graduate of the University of Queensland with 25 years’ experience in technical
and operational optimisation and management, and has held a number of executive roles in mining and processing.
Mr Earner joined the Alkane Group as Chief Operations Officer in August 2013 with responsibility for the safe and
efficient management of the Company’s operations at Tomingley Gold Operations (TGO) and Dubbo (Dubbo Project).
Under his supervision, the successful development of TGO transitioned to profitable and efficient operations. His
guidance also drives the engineering and metallurgical aspects of the Dubbo Project, overseeing optimisation of plant
design and product and marketing development.
Prior to his appointment as the Group’s Chief Operations Officer in August 2013 he spent four years at Straits
Resources Ltd including two years as executive general manager - operations, supervising up to 1,000 employees in
open cut and underground gold mines and an underground copper mine. During the 11 years before that he had
various roles at Rio Tinto Coal Australia’s Mount Thorley Warkworth coal mine and BHP/WMC Olympic Dam copper-
uranium-gold operations. His eight years at Olympic Dam included roles managing the Concentrator and Hydromet
functions which included substantial milling, leaching and solvent extraction circuits. His other positions included
production superintendent - smelting and senior engineer - process control, instrumentation and communications.
David Ian Chalmers – Technical Director
MSc, FAusIMM, FAIG, FIMM, FSEG, MSGA, MGSA, FAICD
Appointed Technical Director 1 September 2017. Resigned as Managing Director 31 August 2017.
After almost 11 years as Managing Director Mr Chalmers stepped down to make way for the appointment of Mr Earner
in his place. Mr Chalmers continues on the Board to provide ongoing technical and commercial knowledge and support
for the Dubbo Project and exploration activities.
Mr Chalmers is a geologist and graduate of the Western Australia Institute of Technology (Curtin University) and has
a Master of Science degree from the University of Leicester in the United Kingdom. He has worked in the mining
and exploration industry for over 40 years, and has gained experience in all facets of exploration and mining through
feasibility and development to the production phase. Mr Chalmers was Technical Director until his appointment as
Managing Director in 2006, overseeing the Group’s minerals exploration efforts across Australia (New South Wales
and Western Australia), Indonesia and New Zealand and the development and operations of the Peak Hill Gold Mine
(NSW). During his time as chief executive he steered the Company through construction and development of the now
fully operational Tomingley Gold Operations and to the threshold of development of the world class Dubbo Project.
Mr Chalmers is a member of the Nomination Committee.
Anthony Dean Lethlean – Non-Executive Director
BAppSc (Geology)
Appointed Director 30 May 2002.
Mr Lethlean is a geologist with over 10 years mining experience, including four years underground on the Golden
Mile in Kalgoorlie. In later years, he has worked as a resource analyst with various stockbrokers and investment banks
including CIBC World Markets. He was a founding director of Helmsec Global Capital Limited which seeded, listed
and funded a number of companies in a range of commodities. He retired from the group in 2014. He is also a non-
executive director of Alliance Resources Ltd (appointed 15 October 2003).
Mr Lethlean is the senior independent Director, Chairman of the Audit Committee and a member of the Remuneration
and Nomination Committees.
26
Alkane Resources Annual Report 2019
FINANCIAL REPORT
Gavin Murray Smith – Non-Executive Director
B.Com, MBA, MAICD
Appointed Director 29 November 2017.
Mr Smith is an accomplished senior executive and non-executive director within multinational business environments.
He has more than 35 years’ experience in Information Technology, Business Development, and General Management
in a wide range of industries and sectors. Mr Smith has worked for the Bosch group for the past 29 years in Australia
and Germany and is current chair and president of Robert Bosch Australia. In this role Mr Smith has led the
restructuring and transformation of the local Bosch subsidiary. Concurrent with this role, he is a non-executive director
of the various Bosch subsidiaries, joint ventures, and direct investment companies in Australia and New Zealand. In
addition, Mr Smith is the chair of the Internet of Things Alliance Australia (IoTAA), the peak body for organisations with
an interest in the IoT.
Mr Smith is a member of the Audit Committee, Remuneration and Nomination Committees.
Dennis Wilkins – Company Secretary
B.Bus, ACIS, AICD
Appointed Company Secretary 29 March 2018.
Prior to joining Alkane Resources Ltd, Mr Wilkins has been a director, or involved in executive management of, several
publicly listed resource companies with operations in Australia, PNG, Scandinavia and Africa.
Principal activities
During the financial year the principal continuing activities of the consolidated entity consisted of:
• mining operations at the Tomingley Gold Operations;
• evaluation activities in relation to the Dubbo Project;
• exploration and evaluation activities on tenements held by the Group; and
• pursuing strategic investments in gold exploration companies.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Result for the year
The profit for the consolidated entity after providing for income tax amounted to $23,293,000 (30 June 2018:
$24,471,000).
This result included a profit before tax of $31,930,000 (30 June 2018: $38,591,000) in relation to Tomingley Gold
Operations.
27
Alkane Resources Annual Report 2019
DIRECTORS’ REPORT/REVIEW OF OPERATIONS
Review of Operations
Tomingley Gold Operations (TGO)
The gold operations at Tomingley are located approximately 50 kilometres southwest of Dubbo in the Central
West of NSW. The operations are based on four gold deposits: Wyoming One, Wyoming Three (mining completed
October 2015), Caloma One (mining completed August 2017) and Caloma Two. Mining occurred in two pits during
the year: Wyoming One (mining completed in December 2018) and Caloma Two (mining completed January 2019).
Underground development commenced from Wyoming One pit during the period.
Total material movements for the period of 804,016bcm comprised 657,648bcm of waste and 146,368bcm of ore. The
average stripping ratio of 4.5 represented a decrease from the corresponding period as a result of overburden having
been previously removed from the main operating pits Wyoming One and Caloma Two.
Milling for the period was in line with design capacity at 998,702 tonnes. Gold recovery of 91.7% for the year was in
line with expectations and consistent with recovery from the prior year ended 30 June 2018 of 91.9% as operations
continued to benefit from the increased oxide ore available for processing from the Wyoming One and Caloma Two
pits. Average grade milled declined to 1.66g/t in the current year as a result of processing both medium and low grade
stockpiles as the operation transitions from open cut to underground.
Production for the period was 48,969 ounces of gold (2018: 78,533 ounces of gold) with All in Sustaining Costs of $947
per ounce (2018: $1,002 per ounce). The average sales price achieved for the period increased to $1,777 per ounce
compared to $1,706 in the prior year. Gold sales of 52,068 ounces (2018: 75,507 ounces) resulted in sales revenue of
$92,513,000 (2018: $128,799,000).
Bullion on hand reduced by 3,109 ounces from 30 June 2018 to 1,727 ounces (fair value of $3,467,000 at period end).
28
Alkane Resources Annual Report 2019 The table below summarises the key operational information:
FINANCIAL REPORT
TGO Production
Unit
Waste mined
Ore mined
Ore mined
Stripping Ratio
Grade mined (2)
Ore milled
Head grade
Gold recovery
Gold poured (3)
Revenue summary
Gold sold
Average price realised
Gold revenue
Cost Summary
Mining
Processing
Site support
C1 Cash Cost
Royalties
Sustaining capital
Rehabilitation
Corporate
All-in Sustaining Cost (1)
September
Quarter
2018
December
Quarter
2018
234,281
336,812
92,615
38,431
258,108
103,488
2.5
1.79
8.8
1.67
March
Quarter
2019
86,555
15,322
29,745
5.6
0.99
June
Quarter
2019
-
-
8,846
-
1.12
FY
2019
FY
2018
657,648
3,165,414
146,368
589,851
400,187
1,589,811
4.5
1.68
5.4
1.99
BCM's
BCM's
Tonnes
Ratio
g/t
Tonnes
240,797
239,687
245,216
273,002
998,702
1,092,602
g/t
%
2.29
92.4
1.62
93.1
1.57
91.7
1.22
89.1
1.66
91.7
2.42
91.9
Ounces
15,634
11,111
10,669
11,555
48,969
78,533
Ounces
A$/Oz
6,656
1,720
A$000's
11,450
23,841
1,716
40,902
10,791
1,841
19,867
10,780
1,883
20,294
52,068
1,777
92,513
75,507
1,706
128,799
A$/Oz
A$/Oz
A$/Oz
A$/Oz
A$/Oz
A$/Oz
A$/Oz
A$/Oz
A$/Oz
384
309
70
763
49
23
101
36
972
338
410
98
846
47
72
24
61
1,050
1,077
175
464
160
799
50
11
35
60
955
952
71
461
57
589
52
69
30
68
254
401
93
748
49
42
52
55
475
236
56
767
52
32
117
34
808
1,727
946
1,727
1,002
4,836
Bullion on hand
Ounces
13,811
Stockpiles
Ore for immediate milling
Tonnes
1,266,911
1,132,562
915,085
677,029
677,029
1,256,823
Stockpile grade (2)
Contained gold
g/t
0.89
0.83
0.75
0.71
0.71
0.97
Ounces
36,335
29,992
22,077
15,368
15,368
39,338
(1) All in Sustaining Cost (AISC) comprises all site operating costs, royalties, mine exploration, sustaining capex, mine development
and an allocation of corporate costs on the basis of ounces produced. AISC does not include share-based payments, production
incentives or net realisable value provision for product inventory.
(2) Based on the resource models.
(3) Represents gold poured at site, not adjusted for refining adjustments which results in minor differences between the
movements in bull-ion on hand and the difference between production and sales.
Ore over the year was mainly sourced from the Wyoming One and Caloma Two pits. On 24 September 2018, the Board
approved the commencement of underground mining at Tomingley Gold Operations, and mining subsequently finished
in the Wyoming One pit in December 2018 and Caloma Two pit in January 2019. Underground development from
the base of the Wyoming One pit continues and is both on schedule and on budget. The operation has continued to
process medium and low grade stockpiles for the remainder of the financial year.
An extensive exploration program focused on the immediate area to the south of the Tomingley mine has continued
as part of the plan to source additional ore feed, either at surface or underground. RC and core drilling was completed
across several adjoining tenements with subsequent analysis showing significant mineralisation across three
tenements. The exploration target has now been identified and further resource definition drilling commenced during
the period and will continue for approximately the next 10-12 months.
29
Alkane Resources Annual Report 2019 DIRECTORS’ REPORT/REVIEW OF OPERATIONS
Dubbo Project
The Dubbo Project remains ready for construction, subject to financing, with the mineral deposit and surrounding
land wholly owned, all major state and federal approvals in place, an established flowsheet and a solid business case.
Efforts during the period focused on product development and marketing with potential customers with a focus on
establishing offtake contracts.
The continued focus on product development has led to the execution of a binding agreement with Ziron Tech (a South
Korean company) to fund the final stage of research and feasibility into a clean process for converting metal oxide,
including Dubbo Project metals, to metals of a highly marketable purity. Several conditions precedent that remained
outstanding at 30 June 2019 have now been satisfied, and an investment of US$1.2m has been made for the final stage
of research which will include construction of a commercial scale equipment unit for testing. The new technology
should allow the Company to bypass traditional supply chains and sell products direct to the consumer.
After more than five years of downward pressures, prices for zirconium materials rose rapidly during the previous
financial year, with zirconium oxychloride (ZOC) prices increasing by more than 80%. Prices have subsequently
remained stable throughout the 2019 financial year. ZOC is the base product for the downstream zirconium industry.
Price increases have historically been driven by reduced ZOC supply from China due to Chinese government
environmental inspections and subsequent shutdowns to upgrade processing facilities to reduce pollution, and
restricted supply of zircon. The Dubbo Project therefore presents as an attractive option for those companies seeking
to reduce China’s supply risks.
The higher price and uncertain supply of zircon is expected to give rise to both price volatility and drive ZOC prices
up further in financial year 2020. Australian Strategic Materials (ASM) continues to engage with customers looking
to convert letters of intent to offtake agreements. Offtake discussions have advanced on all Dubbo Project products
during the financial year to reduce financial dependence on China which supplies approximately 95% of zirconium and
80% of rare earths supply.
Tensions between Japan and South Korea have arisen most recently due to Japan imposing restrictions on three
classes of materials which are essential to semi-conductor manufacturing and latest generation screens. This issue has
highlighted South Korea’s vulnerability caused by their reliance on other countries to supply crucial materials to their
advanced manufacturing industries, particularly considering South Korea’s two leading semi-conductor companies
account for 60% of the world’s memory chip-making capacity. The Dubbo Project therefore presents as an attractive
option for these companies as they seek to reduce supply risks.
Rare earth permanent magnets (NdFeB - neodymium) continued to be the main driver for the rare earths market
during the 2019 financial year due to the rapid growth in demand for electric vehicles worldwide. Despite some
price fluctuation in the March 2019 quarter, prices for several rare earths including neodymium and praseodymium
experienced a resurgence up to June 2019. The widespread environmental crackdown across China has also included
the rare earths industry, putting illegal mining under the spotlight and imposing strict enforcement of the quota
system. This crackdown in China is another factor in maintaining strong commodity prices for these minerals.
The hafnium market experienced further tightening of supply during the current year, while demand continued to
increase for traditional and new applications. Hafnium metal for superalloys used in industrial gas turbines and jet
engines remains the main market, while other applications continue to grow for this niche element.
The niobium market continues to be stable with minimal price fluctuations over the 2019 financial year. Niobium is
used by steel manufacturers as a substitute for vanadium due to vanadium’s historically high price and limited supply.
However, following the significant fall in vanadium prices during the second half of the 2019 financial year, demand for
niobium has softened causing a relatively minor decline in niobium prices.
ASM’s foremost objective is the commercialisation of the technology for Dubbo Project products, through exclusive
rights to commercialise zirconium and hafnium metals both domestically and overseas. The second key objective is
to work collaboratively with Ziron Tech to commercialise and maintain exclusive rights over the technology for other
elements, ultimately creating passive income streams through licensing and royalty arrangements.
ASM continues to work with its financial advisors to pursue the funding strategy for the project. The changing market
dynamics and improved pricing for several key products is expected to assist in discussions with customers to secure
long term product offtake and investment in the project. The ability of the Dubbo Project to provide long term
sustainable security of supply of a diverse range of over 15 critical metals and oxides is one of the strong themes which
is increasingly being recognised both in Australia and overseas.
30
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Exploration
The Company has continued its extensive exploration program focused on securing additional ore feed for the
Tomingley Gold Operations. Exploration focused on the immediate area to the south of the existing mine to
identify potential ore feed resources either at surface or underground. The exploration target area has a combined
strike length exceeding 2,500 metres comprising the Roswell, San Antonio and El Paso prospects with significant
mineralisation identified in all three tenements. As potential quantity and grade of the exploration target is currently
an approximation, the Company intends to complete a program of resource drilling over the next 12 months. Resource
definition drilling at the San Antonio and Roswell prospects commenced during the period and is intended to comprise
over 60,000 metres of predominantly RC drilling.
An additional exploration drilling program has been completed this year as part of the re-evaluation of the potential for
Peak Hill to be developed underground to provide additional ore feed for TGO.
The Company has also maintained a focused multi-commodity exploration program in the Central West of NSW.
Significant changes in the state of affairs
On 24 September 2018, the Board approved the commencement of underground mining at Tomingley Gold
Operations. Underground development from the base of the Wyoming One pit continues and is both on schedule and
on budget. Open pit mining finished in January 2019.
Alkane has pursued a strategic investment into ASX listed gold producer Calidus Resources Ltd (ASX: CAI), and has been
involved in several strategic placements of Calidus shares during the 2019 financial year in addition to completing
multiple on-market purchases.
Alkane did not progress with its proposed investment into gold exploration company Explaurum Limited (ASX: EXU),
and a break fee of $400,000 was paid to the company.
In December 2018, the Group commenced entering into gold forward sales contracts in order to hedge a portion of
future gold sales. Subsequently, the Company secured a term hedging facility with Macquarie Bank Limited into which
contract positions are rolled.
At the end of the period the Company held the following forward sales contracts:
Quarter Ending
December 2019
March 2020
June 2020
September 2020
December 2020
March 2021
Total
Average forward
price $A/oz.
Delivery ounces
1,878
1,867
1,827
1,818
1,847
1,890
1,854
2,990
4,900
5,090
4,130
5,640
5,000
27,750
The Group also held 10,400oz of put options priced at A$1,800 to manage expected revenue from low-grade ore
processing to December 2019. An additional 18,000oz of put options at A$1,800 were entered into to cover a portion
of production for delivery in 2021.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
31
Alkane Resources Annual Report 2019 DIRECTORS’ REPORT/MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Matters subsequent to the end of the financial year
Following execution of a binding agreement between Alkane’s wholly owned subsidiary Australian Strategic Materials
(ASM) and South Korean technology company Zirconium Technology Corporation (‘Ziron Tech’), ASM has made a
payment of US$1.2m to Ziron Tech in July 2019. This payment will fund the final stage of research and feasibility into
an environmentally superior and cost effective method of producing high-purity metals compared to existing methods.
Refer to the ‘Dubbo Project’ section of the Review of Operations for additional details.
On 2 August 2019, the Company executed a subscription agreement and an underwriting agreement with Genesis
Minerals Ltd (ASX: GMD) (‘Genesis’) whereby the Company may invest up to $6m in Genesis by subscribing for shares
under an initial placement, participating in and underwriting an entitlement offer, and potentially by subscribing
for additional shares in a secondary placement that is conditional on Genesis shareholder approval. Genesis is an
Australian gold exploration and mine development company with high-quality projects located in Western Australia’s
premier gold districts.
No other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly
affect, the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs
in future financial years.
Likely developments and expected results of operations
The Group intends to continue evaluation activities in relation to the Dubbo Project in line with details provided in
the Review of Operations. Efforts at TGO continue to be focused on development of the underground mine, and
exploration and evaluation of several of its other tenements to secure additional ore feed. Exploration and evaluation
activities will continue on existing tenements and opportunities to expand the Group’s tenement portfolio will be
pursued with a view to ensuring there is a pipeline of development opportunities for consideration.
Refer to the Review of Operations for further detail on planned developments.
Environmental regulation
The Group is subject to significant environmental regulation in respect of its exploration and evaluation, development
and mining activities.
The Group aspires to the highest standards of environmental management and insists its staff and contractors maintain
that standard. A significant environmental incident is considered to be one that causes a major impact or impacts to
land biodiversity, ecosystem services, water resources or air, with effects lasting greater than one year. There were no
significant environmental incidents reported at any of the Group’s operations.
32
Alkane Resources Annual Report 2019
FINANCIAL REPORT
Meetings of Directors
The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held during
the year ended 30 June 2019, and the number of meetings attended by each Director were:
Full meetings
of Directors
Meetings of committees
Audit
Nomination
Remuneration
Risk
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
I J Gandel
A D Lethlean
D I Chalmers
G M Smith
N P Earner
13
13
13
13
13
13
13
13
13
13
4
4
4*
4
4*
4
4
4*
4
4*
2
2
2
2
2
2
2
2
2*
2*
2
2
2*
2
2*
2
2
2*
2
2*
3*
4
4*
2*
4
4*
4
4*
4*
4
Held: represents the number of meetings held during the time the Director held office or was a member of the committee during
the year.
* Not a member of this committee. D I Chalmers and N P Earner may attend the relevant committee meetings by invitation.
Remuneration report
The Directors are pleased to present Alkane Resources Ltd’s remuneration report which sets out remuneration
information for the Company’s Non-Executive Directors, Executive Directors and other Key Management Personnel
(‘KMP’).
The report contains the following sections:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
Key Management Personnel disclosed in this report
Remuneration governance
Use of remuneration consultants
Executive remuneration policy and framework
Statutory performance indicators
Non-Executive Director remuneration policy
Voting and comments made at the Company’s 2018 Annual General Meeting
Details of remuneration
Service agreements
Details of share-based payments and performance against key metrics
Shareholdings and share rights held by Key Management Personnel
Other transactions with Key Management Personnel
(a) Key Management Personnel disclosed in this report
Non-Executive and Executive Directors
I J Gandel
N P Earner
A D Lethlean
D I Chalmers
G M Smith
33
Alkane Resources Annual Report 2019 DIRECTORS’ REPORT/REMUNERATION REPORT
Other Key Management Personnel
J Carter
Chief Financial Officer (appointed 1 October 2018)
A MacDonald General Manager – Marketing
D Wilkins
Company Secretary
There have been no changes to Directors or KMP since the end of the reporting period.
(b) Remuneration governance
The Company has established a Remuneration Committee to assist the Board in fulfilling its corporate governance
responsibilities with respect to remuneration by reviewing and making appropriate recommendations to the Board on:
• the overall remuneration strategy and framework for the Company;
• the operation of the incentive plans which apply to the executive team, including the appropriateness of key
performance indicators and performance hurdles; and
• the assessment of performance and remuneration of the Executive Directors, Non-Executive Directors and other
KMP.
The Remuneration Committee is a committee of the Board and at the date of this report the members were
independent Non-Executive Directors and included I J Gandel, A D Lethlean and G M Smith.
Their objective is to ensure that remuneration policies and structures are fair, competitive and aligned with the long-
term interests of the Company and its shareholders.
The Company’s annual Corporate Governance Statement provides further information on the role of this committee,
and the full statement is available at URL: www.alkane.com.au/company/governance
(c) Use of remuneration consultants
No remuneration consultants were engaged in the financial year to provide remuneration advice.
(d) Executive remuneration policy and framework
In determining executive remuneration, the Board (or the Remuneration Committee as its delegate) aims to ensure
that remuneration practices:
• are competitive and reasonable, enabling the Company to attract and retain key talent while building a diverse,
sustainable and high-achieving workforce;
• are aligned to the Company’s strategic and business objectives and the creation of shareholder value;
• promote a high performance culture recognising that leadership at all levels is a critical element in this regard;
• are transparent; and
• are acceptable to shareholders.
The executive remuneration framework has three components:
• Total Fixed Remuneration (TFR);
• Short-term Incentives (STI); and
• Long-term Incentives (LTI).
34
Alkane Resources Annual Report 2019
FINANCIAL REPORT
(i) Executive remuneration mix
The Company has in place executive incentive programs which provide the mechanism to place a material portion of
executive pay “at risk”.
(ii) Total fixed remuneration
A review is conducted of remuneration for all employees and executives on an annual basis, or as required. The
Remuneration Committee is responsible for determining executive TFR.
(iii) Incentive arrangements
The Company may utilise both short-term and long-term incentive programs to balance the short- and long-term
aspects of business performance, to reflect market practice, to attract and retain key talent and to ensure a strong
alignment between the incentive arrangements of executives and the creation and delivery of shareholder return.
In prior periods, the Company has used both performance rights and share appreciation rights as the mechanisms
for executive incentives. All share appreciation rights expired in the prior period, and only performance rights have
been used in the current period to incentivise the Company’s executive and KMP. The performance rights plan was
approved by shareholders at the 2016 Annual General Meeting and the share appreciation rights plan was approved by
shareholders at the 2014 Annual General Meeting.
Long-term incentives (LTI)
The LTI is designed to focus executives on delivering long-term shareholder returns. Eligibility for the plan is restricted
to executives and nominated senior managers, being the employees who are most able to influence shareholder value.
Under the plan, participants have an opportunity to earn up to 100% of their total fixed remuneration (calculated
at the time of approval by the Remuneration Committee) comprised of performance rights. Performance rights are
granted in two tranches each year. Each tranche of performance rights has separate vesting conditions being share
price growth and company milestone events, with the executives’ LTI weighted more heavily to the share price growth
tranche. The LTI vesting period is three years.
The performance rights will be provided in the form of rights to ordinary shares in Alkane Resources Ltd that will
vest at the end of the three year vesting period provided the predefined targets are met. On vesting, the rights
automatically convert into one ordinary share each. Participants do not receive any dividends and are not entitled to
vote in relation to the rights to shares prior to the vesting period. If a participant ceases to be employed by the Group
within this period, the rights will be forfeited, except in limited circumstances that are approved by the Board on a
case-by-case basis.
Under the share appreciation rights plan, participants are granted rights to receive fully paid ordinary shares in the
Company. Rights will only vest if the predefined Total Shareholder Return (TSR) performance condition is met. If
a participant ceases to be employed by the Group within this period, the rights will be forfeited, except in limited
circumstances that are approved by the Board on a case-by-case basis. All share appreciation rights expired in the prior
financial year.
Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan.
Targets are generally reviewed annually and set for a forward three year period. Targets reflect factors such as the
expectations of the Group’s business plans, the stage of development of the Group’s projects and the industry business
cycle. The most appropriate target benchmark will be reviewed each year prior to the granting of rights.
The Remuneration Committee is responsible for determining the LTI to vest based on an assessment of whether the
predefined targets are met. To assist in this assessment, the committee receives detailed reports on performance
from management. The committee has the discretion to adjust LTI’s downwards in light of unexpected or unintended
circumstances.
35
Alkane Resources Annual Report 2019
DIRECTORS’ REPORT/REMUNERATION REPORT
(iv) Clawback policy for incentives
Under the terms and conditions of the Company’s incentive plan offer and the plan rules, the Board (or the
Remuneration Committee as its delegate) has discretion to determine forfeiture of unvested equity awards in certain
circumstances (e.g. unlawful, fraudulent or dishonest behaviour or serious breach of obligations to the Company). All
incentive offers and final outcomes are subject to the full discretion of the Board (or the Remuneration Committee as
its delegate).
(v) Share trading policy
The trading of shares issued to participants under any of the Company’s employee share plans is subject to, and
conditional upon, compliance with the Company’s employee share trading policy. Executives are prohibited from
entering into any hedging arrangements over unvested rights under the Company’s employee incentive plans. The
Company would consider a breach of this policy as gross misconduct which may lead to disciplinary action and
potentially dismissal.
(e) Statutory performance indicators
The Company aims to align executive remuneration to the Company’s strategic and business objectives and the
creation of shareholder wealth. The table below shows measures of the Group’s financial performance over the last
five years as required by the Corporations Act 2001. However, these are not necessarily consistent with the specific
measures in determining the variable amounts of remuneration to be awarded to KMP. As a consequence, there may
not always be a direct correlation between the statutory key performance measures and the variable remuneration
rewarded.
30 June 2019
30 June 2018
30 June 2017
30 June 2016
30 June 2015
Revenue ($'000)
Profit/(loss) for the year
attributable to owners ($'000)
Basic earnings /(loss) per share
(cents)
Dividend payments ($'000)
93,994
23,293
4.6
-
Share price at period end (cents)
0.46
Total KMP incentives as a
percentage of profit/(loss) for the
year (%)
3.3%
129,974
24,471
117,792
(28,937)
109,624
4,695
102,467
(4,086)
4.8
-
0.23
3.0%
(5.8)
-
0.24
0.3%
1.1
-
0.20
3.0%
(1.0)
-
0.28
0.0%
(f) Non-Executive Director remuneration policy
On appointment to the Board, all Non-Executive Directors enter into a service agreement with the Company in the
form of a letter of appointment. The letter summarises the Board policies and terms, including remuneration, relevant
to the office of Director.
Non-Executive Directors receive a Board fee and fees for chairing or participating on Board committees. Non-Executive
Directors appointed do not receive retirement allowances. Fees provided are inclusive of superannuation and the Non-
Executive Directors do not receive performance-based pay.
Fees are reviewed annually by the Remuneration Committee taking into account comparable roles and market data
obtained from independent data providers. The base fees of Non-Executive Directors for the period ending 30 June
2019 had not changed since 1 January 2013.
36
Alkane Resources Annual Report 2019
The maximum annual aggregate Directors’ fee pool limit (inclusive of applicable superannuation) is $700,000 and was
approved by shareholders at the Annual General Meeting on 16 May 2013.
Details of Non-Executive Director fees in the year ended 30 June 2019 are as follows:
FINANCIAL REPORT
Base fees
Chair
Other Non-Executive Directors
Additional fees
Audit committee - chair
Audit committee - member
Remuneration committee - chair
Remuneration committee - member
$ per annum
125,000
75,000
7,500
5,000
7,500
5,000
For services in addition to ordinary services, Non-Executive Directors may charge per diem consulting fees at the rate
specified by the Board from time to time for a maximum of four days per month over a 12 month rolling basis. Any fees
in excess of this limit are to be approved by the Board.
(g) Voting and comments made at the Company’s 2018 Annual General Meeting
The Company received more than 87% of “yes” votes on its remuneration report for the last financial period ended 30
June 2018. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration
practices.
37
Alkane Resources Annual Report 2019
DIRECTORS’ REPORT/REMUNERATION REPORT
(h) Details of remuneration
The following table shows details of the remuneration expense recognised for the Directors and the KMP of the Group
for the current and previous financial year measured in accordance with the requirements of the accounting standards.
Fixed remuneration
Cash salary
(a)
Annual and
long service
leave (b)
Post
employment
benefits (c)
$
$
$
Total
$
Variable
remuneration
Rights to
deferred
shares (d)
Total
Perform rel.
$
$
466,943
178,082
16,178
(10,775)
23,058
16,918
506,179
184,225
542,845
64,897
1,049,024
52%
249,122
26%
360,000
169,438
228,750
18,445
33,250
-
-
10,792
18,750
411,695
169,438
258,292
114,132
-
50,688
525,827
169,438
308,980
22%
0%
16%
1,403,213
34,640
91,976
1,529,829
772,562
2,302,391
34%
299,993
-
20,424
320,417
-
320,417
0%
1,703,206
34,640
112,400
1,850,246
772,562
772,562
29%
30 June 2019
Executive Directors
N Earner (e)
D I Chalmers
Other KMP
A MacDonald
D Wilkins (f)
J Carter (e)
Total Executive
Directors and other
KMP
Total NED
remuneration (h)
Total KMP
remuneration
expense
Fixed remuneration
30 June 2018
Cash
salary (a)
Non
monetary
benefits
(a)
Annual
and long
service
leave (b)
Post
employment
benefits (c)
Other (b)
Total
Variable
remuneration
Rights to
deferred
shares (d)
Total
Perform
rel.
$
$
$
$
$
$
$
$
Executive Directors
N Earner
457,545
-
25,045
23,059
D I Chalmers
208,402
32,726
149,596
19,798
Other KMP
M Ball (g)
331,938
-
11,228
21,845
A MacDonald
360,000
69,300
25,670
33,250
J Carter
-
D Wilkins (f)
43,177
-
-
K E Brown (f)
152,500
33,000
-
-
-
-
-
-
1,553,562
135,026
211,539
97,952
-
-
-
-
-
-
-
-
505,649
623,905
1,129,554 55%
410,522
133,010
543,532 24%
365,011
(117,000)
248,011 0%
488,220
99,176
587,396 17%
-
43,177
185,500
-
-
-
-
43,177
0%
185,500 0%
1,998,079
739,091
2,737,170 27%
258,487
-
-
19,845
125,000
403,332
-
403,332 0%
1,812,049
135,026
211,539
117,797
125,000 2,401,411
739,091
3,140,502 24%
Total Executive
Directors and
other KMP
Total NED
remuneration (h)
Total KMP
remuneration
expense
38
Alkane Resources Annual Report 2019 FINANCIAL REPORT
(a) Short-term benefits as per Corporations Regulation 2M.3.03(1) Item 6.
(b) Other long-term benefits as per Corporations Regulation 2M.3.03(1) Item 8. The amounts disclosed in this column represent
the movements in the associated provisions. They may be negative where a KMP has taken more leave than accrued during the
year.
(c) Post-employment benefits are provided through superannuation contributions.
(d) Rights to deferred shares granted under the executive STI and LTI schemes are expensed over the performance period, which
includes the year to which the incentive relates and the subsequent vesting period of the rights.
Rights to deferred shares are equity-settled share-based payments as per the Corporations Regulations 2M.3.03(1) Item11.
These include negative amounts for the rights forfeited during the year.
Details of each grant of share right are provided in the table in section (j). Shareholder approval was received in advance to the
grant of share rights where required.
(e) J Carter was appointed Chief Financial Officer on 1 October 2018.
N Earner was appointed Managing Director in the prior year, having previously been the Group’s Chief Operations Officer.
(f) K E Brown retired as Company Secretary in the prior year.
Company Secretarial services were paid to DWCorporate Pty Ltd, a company associated with Mr Wilkins.
(g) M Ball resigned as Chief Financial Officer in the prior year.
(h) Refer below for details of Non-Executive Directors’ (NED) remuneration.
30 June 2019
Non-Executive Directors
I J Gandel (1)
A D Lethlean
G M Smith
Cash salary
and fees
$
135,084
79,909
85,000
Total Non-Executive Directors
299,993
Other
$
Superannuation
$
Total
$
-
-
-
-
12,833
7,591
-
20,424
147,917
87,500
85,000
320,417
(1) Remuneration details for I J Gandel include unpaid committee fees relating to the current and prior financial
periods. The amount of unpaid fees for the period ending 30 June 2019 is $12,500 (2018: $10,417).
30 June 2018
Non-Executive Directors
I J Gandel
A D Leathlean
G Smith
J S F Dunlop (1)
Cash salary
and fees
$
108,067
79,909
49,583
20,928
Total Non-Executive Directors
258,487
Other
$
Superannuation
$
Total
$
-
-
-
125,000
125,000
10,266
7,591
-
1,988
19,845
118,333
87,500
49,583
147,916
403,332
(1) Other benefits include an ex gratia payment paid to Mr Dunlop upon resignation.
39
Alkane Resources Annual Report 2019 DIRECTORS’ REPORT/REMUNERATION REPORT
The relative proportions of remuneration expense recognised during the year that are linked to performance and those
that are fixed are as follows:
Executive Directors of Alkane Resources Ltd
D I Chalmers
N P Earner
Other Key Management Personnel
J Carter
A MacDonald
D Wilkins
K E Brown
M Ball
Fixed remuneration
At risk - LTI
2019
%
2018
%
2019
%
2018
%
74
48
84
78
100
-
-
76
45
-
83
100
100
100
26
52
16
22
-
-
-
24
55
-
17
-
-
-
• N P Earner was appointed Managing Director 1 September 2017, the entitlements prior to this relate to his role as
Chief Operations Officer.
• J Carter was appointed Chief Financial Officer on 1 October 2018.
• K E Brown retired as Company Secretary in the prior year.
• D Wilkins was appointed Company Secretary in the prior year.
• K E Brown and D Wilkins were not employees of the Company and therefore not eligible to participate in incentive
programs. Instead a fee for services is paid as set out previously.
• M Ball resigned as Chief Financial Officer in the prior year.
(i) Service agreements
Remuneration and other terms of employment for KMP are formalised in service agreements. Details of these
agreements are as follows:
Name and position
Term of agreement
TFR (1)
Termination payment(2)
D I Chalmers
- Technical Director
N Earner
- Managing Director
J Carter
- Chief Financial Officer
A MacDonald
- General Manager - Marketing
D Wilkins
- Company Secretary (3)
On-going commencing
1 September 2017
On-going commencing
1 September 2017
On-going commencing
1 October 2018
On-going commencing
1 February 2017
On-going commencing
29 March 2018
$120,000
$490,000
$330,000
$393,250
6 months
see note 2 below
3 months
6 months
see note 3 below
see note 3 below
(1) Total Fixed Remuneration (TFR) is for the year ended 30 June 2019 and is inclusive of superannuation but does not include
long service leave accruals. TFR is reviewed annually by the Remuneration Committee. Mr Chalmers’ TFR represents his role as
Technical Director and does not include other Director fees.
(2) Specified termination payments are within the limits set by the Corporations Act 2001. The termination benefit provision for
the Managing Director was approved at the Annual General Meeting on 29 November 2017.
Mr Earner may resign with three months’ notice; or
Alkane may terminate the executive employment agreement with three months’ notice; or
Where Mr Earner resigns as a result of a material diminution in the position, Mr Earner will be entitled to payment in lieu of 12
months’ notice and short-term incentives and long-term incentives granted or issued but not yet vested.
40
Alkane Resources Annual Report 2019 FINANCIAL REPORT
(3) Mr Wilkins’ firm, DW Corporate Pty Ltd, is engaged to provide Company secretarial and corporate advisory services. Fees are
charged on an hourly basis, and all amounts are disclosed in the remuneration table in section (h).
Mr Wilkins’ agreement commenced 29 March 2018 until terminated in writing by either party, a four month notice period of
termination is required and no monies are payable consequent to termination.
(j) Details of share-based payments and performance against key metrics
Details of each grant of share rights affecting remuneration in the current or future reporting period are set out below.
Name
Date of grant
Number of
rights granted
Fair value of
share rights at
date of grant
$
Share rights at
fair value
$
Performance
period end
$
Share based
payment
expense
current year
$
Executive Directors
I Chalmers
FY2018 LTI - Performance
Rights - Tranche 1
FY2018 LTI - Performance
Rights - Tranche 2
FY2019 LTI - Performance
Rights - Tranche 1
FY2019 LTI - Performance
Rights - Tranche 2
N Earner
FY2018 LTI - Performance
Rights - Tranche 1
FY2018 LTI - Performance
Rights - Tranche 2
FY2019 LTI - Performance
Rights - Tranche 1
FY2019 LTI - Performance
Rights - Tranche 2
4/12/17
710,960
0.240
170,630
30/6/20
56,877
4/12/17
152,348
0.340
51,798
30/6/20
576
21/11/18
305,785
0.050
15,289
30/6/21
5,096
21/11/18
65,525
0.215
14,088
30/6/21
2,348
4/12/17
5,965,251
0.240
1,431,660
30/6/20
477,220
4/12/17
1,278,268
0.340
434,611
30/6/20
4,829
21/11/18
2,497,245
0.050
124,862
30/6/21
41,621
21/11/18
535,124
0.215
115,052
30/6/21
19,175
Other Key Management Personnel
J Carter
FY2019 LTI - Performance
Rights - Tranche 1
FY2019 LTI - Performance
Rights - Tranche 2
A MacDonald
FY2018 LTI - Performance
Rights - Tranche 1
FY2018 LTI - Performance
Rights - Tranche 2
FY2019 LTI - Performance
Rights - Tranche 1
FY2019 LTI - Performance
Rights - Tranche 2
18/10/18
1,841,591
0.059
108,654
30/6/21
36,218
18/10/18
394,626
0.220
86,818
30/6/21
14,470
11/10/17
1,036,817
0.250
259,204
30/6/20
86,401
11/10/17
222,175
0.345
76,650
30/6/20
852
18/10/18
976,601
0.059
57,619
30/6/21
19,206
18/10/18
209,271
0.220
46,040
30/6/21
7,673
41
Alkane Resources Annual Report 2019
DIRECTORS’ REPORT/REMUNERATION REPORT
(a) The value at grant date for share rights granted during the year as part of remuneration is calculated in accordance
with AASB 2 Share Based Payments. Differences will arise between the number of share rights at fair value in the
table above and the STI and LTI percentages mentioned in section (d) due to different timing of valuation of rights
as approved by the Remuneration Committee and at grant. Refer to note 35 for details of the valuation techniques
used for the rights plan.
(b) Share rights only vest if performance and service targets are achieved. The determination is usually made at the
conclusion of the statutory audit.
(c) FY2018 LTI – Performance Rights – Tranche 2: amounts expensed for the year have reduced due to the downwards
revision of probabilities ascribed to the relevant milestone targets.
The determination of the number of rights that are to vest or be forfeited during a financial year is made by
the Remuneration Committee after the statutory audit has been substantially completed. As such, the actual
determination is made after the balance date. Where there are rights that have vested or been forfeited, details will
be included in the Remuneration Report as the relevant performance period will conclude at the end of the relevant
financial year.
There was no vesting or forfeiting of share rights relating to a performance period which ended during the current
financial year.
Performance against key metrics
No short-term incentives were issued to executives during the year.
The LTI consisted of Tranche 1 (‘T1’) and Tranche 2 (‘T2’) performance rights, being the reward vehicle for targets that
are milestone-based. The tables below provide details of the performance milestone targets, weighting and vesting for
both 2018 and 2019 performance rights granted to Directors and other KMPs.
LTI reward vehicle
Performance metrics
Weighting
Vested
Outcome
Performance Rights
(T1)
Performance Rights
(T2)
Share price performance growth*
82%
Financing obtained and development
commenced at Dubbo Project by the
end of the LTI period
Commissioning of the Dubbo Project
commenced by the end of the LTI
period
Production of the Dubbo Project at
modelled rates of 65% capacity (which
is end of production year one target)
6%
6%
6%
0%
0%
0%
0%
Vesting periods ends 30 June
2020 (FY18) and 2021 (FY19)
Vesting periods ends 30 June
2020 (FY18) and 2021 (FY19)
Vesting periods ends 30 June
2020 (FY18) and 2021 (FY19)
Vesting periods ends 30 June
2020 (FY18) and 2021 (FY19)
* Share price performance growth targets for performance rights (T1) above are as follows:
Annual growth rate (CAGR)
% Performance rights vesting (T1)
Less than 10% CAGR
Nil
Above 10% CAGR up to 15% CAGR
Pro rata vesting from 0% - 50%
At 15% CAGR
50%
Above 15% CAGR up to 30% CAGR
Pro rata vesting from 50% - 100%
At 30% CAGR
100%
42
Alkane Resources Annual Report 2019
FINANCIAL REPORT
(k) Shareholdings and share rights held by Key Management Personnel
Shareholding
The number of shares in the Company held during the financial year by each Director and other members of KMP of
the consolidated entity, including their personally related parties, is set out below:
Balance at the
start of the year
Received as
part of the
remuneration
Additions
Disposals/other
Balance at the
end of the year
Ordinary shares
I J Gandel *
A D Lethlean
D I Chalmers
N Earner
G Smith
A MacDonald
111,261,217
520,076
4,152,124
146,666
142,000
710,000
116,932,083
-
-
-
-
-
-
-
13,786,059
(13,786,059)
111,261,217
120,000
-
-
-
1,100,000
15,006,059
-
-
-
-
-
640,076
4,152,124
146,666
142,000
1,810,000
(13,786,059)
118,152,083
* The changes in Mr Gandel’s interest in shares noted above arose due to an incorrect perception about Alkane shares acquired
by Chapelgreen Pty Ltd (‘Chapelgreen’). The uncertainties giving rise to this perception have been resolved. In the interests of
transparency, disclosure was made via the ASX announcement platform on 13 November 2018. Notwithstanding the disclosure,
neither Alkane nor Mr Gandel considered that Mr Gandel had a relevant interest in the shares mentioned.
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial year by each Director
and other members of KMP of the consolidated entity, including their personally related parties, is set out below:
Balance at the
start of the year
Granted
Vested
Expired/
forfeited/other
Balance at the
end of the year
Performance rights over
ordinary shares
D I Chalmers -
Performance rights
N Earner - Performance
rights
863,308
371,310
7,243,519
3,032,369
J Carter - Performance
rights
-
2,236,217
A MacDonald -
Performance rights
1,258,992
1,185,872
9,365,819
6,825,768
-
-
-
-
-
-
-
-
-
-
1,234,618
10,275,888
2,236,217
2,444,864
16,191,587
The determination of the number of rights that are to vest or be forfeited is made by the Remuneration Committee
after the statutory audit has been substantially completed. As such, the actual determination was made after the
balance date however details have been included in the current Remuneration Report as the relevant performance
period is the current financial year.
(l) Other transactions with Key Management Personnel
There were no other transactions with KMP’s during the financial year ended 30 June 2019.
There were no unissued ordinary shares of Alkane Resources Ltd under performance rights outstanding at the date of
this report.
This concludes the remuneration report, which has been audited.
43
Alkane Resources Annual Report 2019 DIRECTORS’ REPORT/ INDEMNITY AND INSURANCE OF OFFICERS
Indemnity and insurance of officers
Alkane Resources Ltd has entered into deeds of indemnity, access and insurance with each of the Directors. These
deeds remain in effect as at the date of this report. Under the deeds, the Company indemnifies each Director to the
maximum extent permitted by law against legal proceedings or claims made against or incurred by the Directors in
connection with being a Director of the Company, or breach by the Group of its obligations under the deed.
The liability insured is the indemnification of the Group against any legal liability to third parties arising out of any
Directors’ or officers’ duties in their capacity as a Director or officer other than indemnification not permitted by law.
No liability has arisen under this indemnity as at the date of this report.
The Group has not otherwise, during or since the financial year, indemnified nor agreed to indemnify an officer
of the Group or of any related body corporate, against a liability incurred as such by an officer.
During the year the Company has paid premiums in respect of Directors’ and executive officers’ insurance. The
contracts contain prohibitions on disclosure of the amount of the premiums and the nature of the liabilities under
the policies.
Proceedings on behalf of the Company
No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the
auditor’s expertise and experience with the Group is important.
The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by
another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in note 29 to the financial statements do not
compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following
reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set
out immediately after this Directors’ Report.
44
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Rounding of amounts
The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, issued by the Australian Securities
and Investments Commission, relating to the ‘rounding-off’ of amounts in the Directors’ Report and Financial Report.
Amounts in this report have been rounded off in accordance with that ASIC Legislative Instrument to the nearest
thousand dollars, or in certain cases, to the nearest dollar.
This report is made in accordance with a resolution of Directors.
On behalf of the Directors,
N Earner
Managing Director
Alkane Resources
30 August 2019
Perth
45
Alkane Resources Annual Report 2019
AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
As lead auditor for the audit of Alkane Resources Limited for the year ended 30 June 2019, I declare
that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Alkane Resources Limited and the entities it controlled during the
period.
Helen Bathurst
Partner
PricewaterhouseCoopers
Perth
30 August 2019
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
21
46
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Financial Statements
Consolidated Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Note 1. Segment information
Note 2. Revenue
Note 3. Expenses
Note 4. Other net income
Note 5. Income tax
Note 6. Current assets – cash and cash equivalents
Note 7. Current assets – trade and other receivables
Note 8. Current assets – inventories
Note 9. Current assets – derivative financial instruments
Note 10. Current assets – biological assets
Note 11. Non-current assets – financial assets at fair value through other comprehensive income
Note 12. Non-current assets – derivative financial instruments
Note 13. Non-current assets – exploration and evaluation
Note 14. Non-current assets – property, plant and equipment
Note 15. Non-current assets – biological assets
Note 16. Non-current assets – Impairment of non-current assets
Note 17. Non-current assets – other financial assets
Note 18. Current liabilities – trade and other payables
Note 19. Current liabilities – income tax provision
Note 20. Current liabilities – provisions
Note 21. Non-current liabilities – provisions
Note 22. Equity – issued capital
Note 23. Equity – reserves
Note 24. Equity – accumulated losses
Note 25. Critical accounting judgements, estimates and assumptions
Note 26. Financial risk management
Note 27. Capital risk management
Note 28. Key management personnel disclosures
Note 29. Remuneration of auditors
Note 30. Contingent assets
Note 31. Contingent liabilities
Note 32. Commitments
Note 33. Events after the reporting period
Note 34. Related party transactions
Note 35. Share-based payments
Note 36. Earnings per share
Note 37. Assets pledged as security
Note 38. Parent entity information
Note 39. Interests in subsidiaries
Note 40. Reconciliation of profit after income tax to net cash from operating activities
Note 41. Significant accounting policies
49
50
51
52
53
54
55
56
57
60
60
61
61
62
62
62
63
64
66
66
67
68
68
68
70
71
71
72
72
74
76
76
77
77
77
78
79
79
80
82
83
83
84
85
85
47
Alkane Resources Annual Report 2019 CONSOLIDATED FINANCIAL STATEMENTS
These financial statements are consolidated financial statements for the Group consisting of Alkane
Resources Ltd and its subsidiaries. A list of major subsidiaries are included in note 39.
The financial statements are presented in the Australian currency.
Alkane Resources Ltd is a company limited by shares, incorporated and domiciled in Australia. Its
registered office and principal place of business is:
Alkane Resources Ltd
89 Burswood Road
Burswood WA 6100
The financial statements were authorised for issue by Directors on 30 August 2019. The Directors
have the power to amend and reissue the financial statements.
All press releases, financial reports and other information are available at the Shareholders’ Centre
on our website: www.alkane.com.au
48
Alkane Resources Annual Report 2019 Consolidated Statement of Comprehensive Income
For the year ended 30 June 2019
FINANCIAL REPORT
Continuing operations
Revenue
Cost of sales
Gross profit
Other net income
Expenses
Other expenses
Finance costs
Total expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year
attributable to the owners of Alkane Resources Ltd
Other comprehensive loss
Items that will not be reclassified subsequently to profit or loss
Changes in the fair value of equity investments at fair
value through other comprehensive income
Items that may be reclassified subsequently to profit or loss
Losses on cash flow hedges
Other comprehensive loss for the year, net of tax
Total comprehensive income for the year
attributable to the owners of Alkane Resources Ltd
Basic earnings per share
Diluted earnings per share
Note
2019
$’000
2
3
4
3
5
24
93,994
(60,912)
33,082
1,856
(8,887)
(419)
(9,306)
25,632
(2,339)
23,293
151
(780)
(629)
2018
$’000
129,974
(89,323)
40,651
1,548
(10,280)
(603)
(10,883)
31,316
(6,845)
24,471
-
-
-
22,664
24,471
Cents
4.6
4.5
36
36
Cents
4.8
4.8
The above consolidated statement of comprehensive income should be
read in conjunction with the accompanying notes.
49
Alkane Resources Annual Report 2019 CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet
For the year ended 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Biological assets
Total current assets
Non-current assets
Exploration and evaluation
Property, plant and equipment
Financial assets at fair value through other comprehensive income
Biological assets
Derivative financial instruments
Other financial assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Income tax provision
Provisions
Total current liabilities
Non-current liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
50
Note
2019
$’000
2018
$’000
6
7
8
9
10
13
14
11
15
12
17
18
19
20
21
5
22
23
24
69,582
1,998
4,816
25
80
72,003
2,030
19,153
-
12
76,501
93,198
103,894
51,038
7,767
402
678
8,417
172,196
248,697
8,007
-
4,438
12,445
13,059
9,317
22,376
34,821
93,136
36,266
-
526
-
8,347
138,275
231,473
9,299
6,929
11,202
27,430
13,647
-
13,647
41,077
213,876
190,396
220,111
2,352
(8,587)
213,876
220,160
2,116
(31,880)
190,396
The above consolidated balance sheet should
be read in conjunction with the accompanying notes.
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
Share capital
$’000
Share-based
payments
reserve
$’000
Accumulated
losses
$’000
Total equity
$’000
Balance at 1 July 2017
219,948
1,330
Profit after income tax expense for the year
Total comprehensive income for the year
Share issue transaction costs (Note 22)
Share based payments (Note 35)
Deferred tax recognised in equity (Note 22)
-
-
(5)
301
(84)
Balance at 30 June 2018
220,160
-
-
-
786
-
2,116
(56,351)
24,471
24,471
-
-
-
164,927
24,471
24,471
(5)
1,087
(84)
(31,880)
190,396
Share capital
$’000
Share-based
payments
reserve
$’000
Other
reserves
$’000
Accumulated
losses
$’000
Total equity
$’000
Balance at 1 July 2018
220,160
2,116
Profit after income tax expense for the year
Other comprehensive loss for the year, net of tax
Total comprehensive income for the year
Share based payments (Note 35)
-
-
-
-
Deferred tax recognised in equity (Note 22)
(49)
-
-
-
865
-
-
-
(629)
(629)
-
-
(31,880)
23,293
-
23,293
-
-
190,396
23,293
(629)
22,664
865
(49)
Balance at 30 June 2019
220,111
2,981
(629)
(8,587)
213,876
The above consolidated statement of changes in equity
should be read in conjunction with the accompanying notes
51
Alkane Resources Annual Report 2019 CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Cash Flows
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers (inclusive of GST)
Interest received
Finance costs paid
Royalties and selling costs
Other receipts
Net cash from operating activities
40
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Payments for exploration expenditure
Payments for financial assets at fair value through other comprehensive
income
Payments for security deposits
Refund of security deposits
Purchase of biological assets
Proceeds from the sale of biological assets
Net cash used in investing activities
Cash flows from financing activities
Cost of share issue
Proceeds from borrowings
Repayment of borrowings
Net cash from financing activities
22
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
6
Note
2019
$’000
92,513
(55,944)
36,569
1,477
(138)
(2,864)
1,172
36,216
(19,621)
4
(11,578)
(7,616)
(80)
10
(195)
439
2018
$’000
128,801
(72,240)
56,561
1,175
(110)
(4,649)
1,556
54,533
(9,224)
-
(10,969)
-
(4,114)
-
(203)
-
(38,637)
(24,510)
-
988
(988)
-
(2,421)
72,003
69,582
(5)
993
(977)
11
30,034
41,969
72,003
The above consolidated statement of cash flows should
be read in conjunction with the accompanying notes.
52
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Note 1. Segment information
The consolidated entity is organised into two operating segments: gold operations and the exploration, evaluation and
development of rare metals. These operating segments are based on the internal reports that are reviewed and used
by the Board of Directors (who are identified as the Chief Operating Decision Makers) in assessing performance and in
determining the allocation of resources.
Costs that do not relate to either of the operating segments have been identified as unallocated costs. Corporate
assets and liabilities that do not relate to either of the operating segments have been identified as unallocated. The
Group has formed a tax consolidation group and therefore tax balances are disclosed under the unallocated grouping.
The Group utilises a central treasury function resulting in cash balances being included in the unallocated segment.
30 June 2019
Gold sales to external customers
Interest income
Segment net profit/(loss) before income tax
Segment net profit includes the following non-cash adjustments:
Depreciation and amortisation
Exploration expenditure written off or provided for
Inventory product movement and provision
Restructuring provision
Income tax expense
Total adjustments
Total segment assets
Total segment liabilities
Net segment assets
Gold
Operations
$’000
Rare Metals
$’000
Unallocated
$’000
Total
$’000
92,513
-
92,513
31,930
(7,165)
-
(14,669)
104
-
(21,730)
38,035
(22,982)
15,053
-
-
-
812
(12)
(444)
-
-
-
(456)
115,478
(262)
115,216
-
1,481
1,481
(7,110)
(150)
(138)
-
-
(2,339)
(2,627)
95,184
(11,577)
83,607
92,513
1,481
93,994
25,632
(7,327)
(582)
(14,669)
104
(2,339)
(24,813)
248,697
(34,821)
213,876
53
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 1.
Gold
Operations
$’000
Rare Metals
$’000
Unallocated
$’000
Total
$’000
30 June 2018
Gold sales to external customers
Interest income
Segment net profit/(loss) before income tax
128,799
-
128,799
38,591
-
-
-
-
1,175
1,175
(108)
(7,167)
Segment net loss includes the following non-cash adjustments:
Depreciation and amortisation
Deferred stripping costs capitalised
Exploration expenditure written off or provided for
Inventory product movement and provision
Restructuring provision
Total adjustments
Total segment assets
Total segment liabilities
Net segment assets
Note 2. Revenue
Revenue from continuing operations
Gold sales
Interest income
(38,019)
(4)
-
-
-
-
(4)
109,902
(1,268)
108,634
4,280
-
9,884
(496)
(24,351)
37,180
(31,120)
6,060
2019
$’000
92,513
1,481
93,994
(260)
-
(181)
-
-
(441)
84,391
(8,689)
75,702
2018
$’000
128,799
1,175
129,974
128,799
1,175
129,974
31,316
(38,283)
4,280
(181)
9,884
(496)
(24,796)
231,473
(41,077)
190,396
(a) Revenue
Revenue is recognised when control of a good or service transfers to a customer. Control is generally determined to be
when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that
good or service.
(b) Gold sales
Revenue from the sale of goods is recognised when the Group satisfies its performance obligations under its contract
with the customer by transferring such goods to the customer’s control. Control is generally determined to be when
the customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good.
(c) Interest income
Interest is recognised as it is accrued using the effective interest method.
54
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 1.
FINANCIAL REPORT
Note 3. Expenses
Cost of sales
Cash costs of production
Deferred stripping costs capitalised
Inventory product movement
Depreciation and amortisation
Royalties and selling costs
2019
$’000
36,662
-
14,669
7,165
2,416
60,912
2018
$’000
61,288
(4,280)
(9,884)
38,019
4,180
89,323
(a) Cash costs of production
Cash costs of production include ore and waste mining costs, processing costs and site administration and support
costs. Cash costs of production include $10,281,000 of employee remuneration benefits (2018: $15,889,000).
(b) Deferred stripping costs capitalised
Stripping costs capitalised represents costs incurred in the development and production phase of a mine and are
capitalised as part of the cost of constructing the mine and subsequently amortised over the useful life of the ore body
that access is provided to on a units-of-production basis.
(c) Inventory product movement
Inventory product movement represents the movement in the balance sheet inventory ore stockpile, gold in circuit
and bullion on hand.
Refer to note 8 for further details on the Group’s accounting policy for inventory.
(d) Inventory product provision for net realisable value
Inventory must be carried at the lower of cost and net realisable value. Net realisable value is the estimated selling
price in the ordinary course of business less estimated costs to complete processing and to make a sale. The net
realisable value provision equals the decrement between the net realisable value and the carrying value before
provision.
Refer to note 8 for further details on the Group’s accounting policy for inventory.
Other expenses
Corporate administration
Employee remuneration and benefits expensed
Share based payments
Professional fees and consulting services
Restructuring provision
Exploration expenditure provided for or written off
Directors' fees and salaries expensed
Depreciation
Dubbo project expenses not capitalised
Non-core project expenses
2019
$’000
2,288
1,570
865
1,633
(104)
582
614
162
(80)
1,357
8,887
2018
$’000
2,225
1,829
1,087
1,467
496
188
726
264
945
1,053
10,280
55
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 4.
Note 4. Other net income
Net foreign exchange gains
Loss on disposal of non-current assets
Other income
2019
$’000
(7)
(7)
1,870
1,856
2018
$’000
5
(2)
1,545
1,548
The other income includes agistment and livestock sales of $697,000 (2018: $612,000) from farming activity, sale of
water available under certain owned water licences of $320,000 (2018: $234,000), and revenue of $400,000 (2018:
Nil) in relation to a share subscription agreement between Australian Strategic Materials (ASM) and Explaurum Ltd that
was subsequently terminated thereby entitling ASM to a break fee.
56
Alkane Resources Annual Report 2019 FINANCIAL REPORT
30 June 2019
$’000
30 June 2018
$’000
Note 5. Income tax
(a) Income tax expense
Current tax
Current tax on profits for the year
Adjustments for current tax of prior periods
Total current tax expense
Deferred income tax
Decrease/(increase) in deferred tax asset
Increase in deferred tax liabilities
Total deferred tax expense/(benefit)
Income tax expense
-
(6,929)
(6,929)
5,914
3,354
9,268
2,339
(b) Reconciliation of income tax expense to prima facie tax payable
Profit before income tax expense
Tax at the Australian tax rate of 30.0% (2018 - 30%)
30 June 2019
$’000
25,003
7,501
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Tax benefits of deductible equity raising costs
Research and development tax incentive
Non-deductible share based payments
Other items
Subtotal
Movement in temporary differences
Under provision for prior year
Utilisation of previously unrecognised tax losses
Income tax expense
(49)
-
259
8
7,719
(6,533)
1,226
(73)
2,339
6,929
-
6,929
(84)
-
(84)
6,845
30 June 2018
$’000
31,316
9,395
(85)
(146)
326
16
9,506
(1,076)
-
(1,585)
6,845
57
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 5.
(c) Deferred tax assets
Movements
Tax losses
$’000
At 1 July 2017
Charged/(credited)
- profit or loss
- direct to equity
At 30 June 2018
1,066
(1,066)
-
-
Rehabilitation
Provision and
assets
$’000
Property, plant
and equipment
$’000
4,114
505
-
4,619
21,587
5,745
-
27,332
R&D Tax
incentive
credits
$’000
3,870
(3,870)
-
-
Other
$’000
2,162
822
(84)
2,900
De-recognition of deferred tax asset charged to profit or loss
Net recognised deferred tax asset available for offset against deferred tax liabilities
Movements
Tax losses
$’000
At 1 July 2018
- to profit or loss
- direct to equity
As at 30 June 2019
-
-
-
-
Rehabilitation
Provision and
assets
$’000
Property, plant
and equipment
$’000
R&D Tax
incentive
credits
$’000
4,619
(1,002)
-
3,617
20,843
(4,491)
-
16,352
-
1,072
-
1,072
Other
$’000
2,900
(1,493)
(49)
1,358
Total
$’000
32,799
2,136
(84)
34,851
(6,489)
28,362
Total
$’000
28,362
(5,914)
(49)
22,399
(d) Deferred tax liabilities
The balance comprises temporary differences attributable to:
Exploration expenditure
Other
Total deferred tax liabilities
Set-off of deferred tax assets
Net recognised deferred tax liabilities
2019
$’000
(31,168)
(548)
(31,716)
22,399
(9,317)
2018
$’000
(27,941)
(421)
(28,362)
28,362
-
Movements
At 1 July 2017
- to profit or loss
At 30 June 2018
At 1 July 2018
- to profit or loss
At 30 June 2019
58
Exploration
Expenditure
$’000
Other
$’000
24,932
3,009
27,941
27,941
3,227
31,168
302
119
421
421
127
548
Total
$’000
25,234
3,128
28,362
28,362
3,354
31,716
Alkane Resources Annual Report 2019 FINANCIAL REPORT
(e) Deferred tax recognised directly in equity
Relating to equity raising costs
(f) Unrecognised temporary differences and tax losses
Unrecognised tax losses
Potential tax benefit at 30% (2018: 30%)
2019
$’000
(49)
2019
$’000
18,315
5,495
2018
$’000
(84)
2018
$’000
14,472
4,342
The potential benefit of carried forward tax losses will only be obtained if taxable income is derived of a nature and
amount sufficient to enable the benefit from the deductions to be realised. In accordance with the Group’s policies
for deferred taxes, a deferred tax asset is recognised only if it is probable that sufficient future taxable income will be
generated to offset against the asset.
Determination of future taxable profits requires estimates and assumptions as to future events and circumstances
including commodity prices, ore resources, exchange rates, future capital requirements, future operational
performance, the timing of estimated cash flows, and the ability to successfully develop and commercially exploit
resources.
Tax legislation prescribes the rate at which tax losses transferred from entities joining a tax consolidation group can be
applied to taxable incomes and this rate is diluted by changes in ownership, including capital raisings. As a result the
reduction in the rate at which the losses can be applied to future taxable incomes, the period of time over which it is
forecast that these losses may be utilised has extended beyond that which management considers prudent to support
their continued recognition for accounting purposes. Accordingly, no deferred tax asset has been recognised for certain
tax losses. Recognition for accounting purposes does not impact the ability of the Group to utilise the losses to reduce
future taxable profits.
Alkane Resources Ltd and its wholly owned Australian controlled entities have implemented the tax consolidation
legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of
these entities are set off in the consolidated financial statements.
Unrecognised temporary differences
Potential tax benefit at 30% (2018: 30%)
2019
$’000
-
-
2018
$’000
21,630
6,489
59
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 5.
Deferred tax assets relating to deductible temporary differences can only be recognised to the extent that it is
probable that future taxable profits will be available against which the deductible temporary difference can be utilised.
The deferred tax asset relating to impairment expense in the prior year has not been recognised at this time as it is
not probable that sufficient future taxable profits will be available against which to offset the deductible temporary
differences. Recognition for accounting purposes does not impact the ability of the Group to utilise the deductible
temporary differences to reduce future taxable profits.
Provision for income tax
2019
$’000
-
Note 6. Current assets – cash and cash equivalents
Cash at bank
2019
$’000
69,582
2018
$’000
6,929
2018
$’000
72,003
Cash at bank at balance date weighted average interest rate was 2.1% (2018: 1.6%).
Cash and cash equivalents include cash on hand and deposits held at call with financial institutions and other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.
Note 7. Current assets – trade and other receivables
Trade receivables
Prepayments
GST and fuel tax credit receivable
(a) Classification as receivables
2019
$’000
348
890
760
1,998
2018
$’000
13
1,073
944
2,030
Receivables are recognised initially at fair value and then subsequently measured at amortised cost, less provision
for credit losses. As at 30 June 2019 the Group has determined that the expected provision for credit losses is not
material.
In determining the recoverability of a trade or other receivable using the expected credit loss model, the group
performs a risk analysis considering the type and age of the outstanding receivables, the creditworthiness of the
counterparty, contract provisions, letter of credit and timing of payment.
(b) Fair value of receivables
Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair
value.
60
Alkane Resources Annual Report 2019 (c) Impairment and risk exposure
Information about the impairment of receivables, their credit quality and the Group’s exposure to credit risk, foreign
currency risk and interest rate risk can be found in note 26.
FINANCIAL REPORT
Note 8. Current assets – inventories
Ore stockpiles
Gold in circuit
Bullion on hand
Consumable stores
2019
$’000
704
834
1,539
1,739
4,816
2018
$’000
11,229
1,184
5,333
1,407
19,153
(a) Assigning costs to inventories
Costs are assigned to ore stockpiles, gold in circuit and bullion on hand on the basis of weighted average costs.
Inventories must be carried at the lower of cost and net realisable value. Cost comprises direct materials, direct labour
and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of
normal operating capacity. At balance date ore stockpiles, gold in circuit, bullion on hand and consumable stores were
carried at cost.
No provision was recorded at 30 June 2019 to write down inventories to their recoverable value (2018: $nil). The
movement in the provision was nil (2018: $nil).
Consumable stores include diesel, explosives and other consumables items. These items are carried at cost.
(b) Amounts recognised in profit or loss
Consumable inventories recognised as an expense during the year ended 30 June 2019 amounted to $12,499,000
(2018: $16,819,000). These were included in costs of production.
Product inventory movement during the year ended 30 June 2019 amounted to an expense of $14,669,000 (2018:
credit $9,884,000) and is disclosed as part of cost of sales in Note 3.
Note 9. Current assets – derivative financial instruments
Derivative financial instruments
Commodity put options – cash flow hedges
2019
$’000
25
2018
$’000
-
During the period subsidiary company Tomingley Gold Operations Pty Ltd (TGO) entered into several commodity put
option contracts to hedge a portion of its future gold sales. Movements in the options’ fair value are reflected through
other comprehensive income.
61
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 10.
Note 10. Current assets – biological assets
Biological assets comprise livestock which were acquired by Toongi Pastoral Company Pty Ltd as part of farming
operations on the surrounding land to the Dubbo Project mining lease.
Biological assets
2019
$’000
80
2018
$’000
12
Note 11. Non-current assets – financial assets
at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income (FVOCI) are comprised of equity securities which
are not held for trading, and which the Group has irrevocably elected at initial recognition to recognise in this category.
These are strategic investments and the Group considers this classification to be more relevant.
Equity investments designed as held for sale are excluded from the table below and are disclosed as current assets –
available for sale.
Listed securities
2019
$’000
7,767
2018
$’000
-
During the period the Company secured a substantial investment in Calidus Resources Ltd (ASX: CAI), in addition to
acquiring shares in Genesis Minerals Ltd (ASX: GMD) as part of the Company’s growth strategy of investing in junior
gold mining companies and projects that have high exploration potential and/or require near term development
funding.
On disposal of these equity investments, any related balance within the FVOCI reserve is reclassified to retained
earnings.
Note 12. Non-current assets – derivative financial instruments
Commodity put options - cash flow hedges
2019
$’000
678
2018
$’000
-
During the period subsidiary company Tomingley Gold Operations Pty Ltd (TGO) entered into several commodity put
option contracts to hedge a portion of its future gold sales. Movements in the options’ fair value are reflected through
other comprehensive income. The fair value of put options with an expiry greater than 12 months are disclosed above.
The total movement in fair value of commodity put options recognised in other comprehensive income for the year
ended 30 June 2019 was $780,000 (2018: $nil).
62
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Note 13. Non-current assets – exploration and evaluation
Opening balance
Expenditure during the year
Amounts provided for or written off
2019
$’000
93,136
11,166
(408)
103,894
2018
$’000
83,107
10,210
(181)
93,136
(a) Amounts recognised in profit or loss
Exploration and evaluation costs are carried forward on an area of interest basis. Costs are recognised and carried
forward where rights to tenure of the area of interest are current and either:
• the expenditures are expected to be recouped through successful development and exploitation of the area of
interest; or
• activities in the area of interest have not at the reporting date reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable reserves, and active and significant
exploration and evaluation activities in, or in relation to, the area of interest are continuing.
Exploration and evaluation assets are tested for impairment when reclassified to development tangible or intangible
assets, or whenever facts or circumstances indicate impairment. An impairment loss is recognised for the amount
by which the exploration and evaluation assets carrying amount exceeds their recoverable amount. The recoverable
amount is the higher of the exploration and evaluation assets fair value less costs of disposal and their value in use.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are
demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment
and then reclassified to mine properties under development. No amortisation is charged during the exploration and
evaluation phase.
Recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful
development and commercial exploitation, or alternatively, sale of the respective areas of interest.
There may exist, on the Group’s exploration properties, areas subject to claim under native title or containing sacred
sites or sites of significance to Aboriginal people. As a result, exploration properties or areas within tenements may be
subject to exploration or mining restrictions.
63
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 14.
Note 14. Non-current assets – property, plant and equipment
Land and
buidlings
$’000
Plant and
equipment
$’000
Capital
WIP
$’000
Mine
properties
$’000
Total
$’000
Year ended 30 June 2019
Opening cost
Additions
Transfers between classes
Disposals
Net movement
Closing cost
Opening accumulated depreciation
and impairment
Depreciation charge:
- to profit or loss
- capitalised to Mine properties
Disposals
Net movement
39,743
73,590
-
636
-
636
-
7,437
(579)
6,858
40,379
80,448
(12,483)
(71,651)
(191)
-
-
(191)
(1,217)
(1,021)
567
(1,671)
Closing accumulated depreciation
and impairment
(12,674)
(73,322)
630
13,247
(10,149)
-
3,098
3,728
162,518
9,885
2,076
-
11,961
174,479
276,481
23,132
-
(579)
22,553
299,034
-
-
-
-
-
-
(156,081)
(240,215)
(5,919)
-
-
(5,919)
(7,327)
(1,021)
567
(7,781)
(162,000)
(247,996)
Closing net carrying value
27,705
7,126
3,728
12,479
51,038
Land and
buidlings
$’000
Plant and
equipment
$’000
Capital
WIP
$’000
Mine
properties
$’000
Total
$’000
Year ended 30 June 2018
Opening cost
Additions
Transfers between classes
Disposals
Net movement
Closing cost
Opening accumulated depreciation
and impairment
Depreciation charge
Disposals
Net movement
39,713
72,863
-
30
-
30
-
854
(127)
727
39,743
73,590
(11,549)
(65,532)
(934)
-
(934)
(6,244)
125
(6,119)
Closing accumulated depreciation
and impairment
(12,483)
(71,651)
396
3,207
(2,973)
-
234
630
-
-
-
-
-
149,712
10,717
2,089
-
12,806
162,518
262,684
13,924
-
(127)
13,797
276,481
(124,976)
(202,057)
(31,105)
-
(31,105)
(38,283)
125
(38,158)
(156,081)
(240,215)
Closing net carrying value
27,260
1,939
630
6,437
36,266
64
Alkane Resources Annual Report 2019 FINANCIAL REPORT
All property, plant and equipment is stated at historical cost less accumulated depreciation and impairment charges.
Historical cost includes:
• expenditure that is directly attributable to the acquisition of the items;
• direct costs associated with the commissioning of plant and equipment including pre-commissioning costs in testing
the processing plant;
• where the asset has been constructed by the Group, the cost of all materials used in construction, direct labour on
the project and project management costs associated with the asset; and
• the present value of the estimated costs of dismantling and removing the asset and restoring the site on which
it is located.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is
derecognised when replaced. All other repairs and maintenance is charged to profit or loss during the reporting period
in which they are incurred. Depreciation is calculated using the straight-line method to allocate their cost over their
estimated useful lives as follows:
Buildings
units of production
Plant and equipment
units of production
Mining properties
Office equipment
Furniture and fittings
Motor vehicles
Software
units of production
3-5 years
4 years
4-5 years
2-3 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in
the statement of comprehensive income.
(a) Deferred stripping costs capitalised
Overburden and other mine waste materials removed during the initial development of an open pit mine in order to
access the mineral deposit is referred to as development stripping. Costs directly attributable to development stripping
inclusive of an allocation of relevant overhead expenditure, are capitalised as a non-current asset in mine properties.
Capitalisation of development stripping costs cease at the time that ore begins to be extracted from the mine.
Development stripping costs are amortised over the useful life of the ore body that access has been provided to on a
units of production basis.
Production stripping commences at the time that ore begins to be extracted from the mine and normally continues
throughout the life of a mine. The costs of production stripping are charged to the income statement as operating
costs, when the current ratio of waste material to ore extracted for a component of the ore body is below the
expected stripping ratio of that component. When the ratio of waste to ore is not expected to be constant, production
stripping costs are accounted for as follows:
• all costs are initially charged to profit or loss and classified as operating costs;
• when the current ratio of waste to ore is greater than the estimated ratio of a component of the ore body, a portion
of the stripping costs, inclusive of an allocation of relevant overhead expenditure, is capitalised to mine properties;
and
• the capitalised stripping asset is amortised over the useful life of the ore body to which access has been improved.
65
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 14.
The amount of production stripping costs capitalised or charged in a reporting period is determined so that the
stripping expense for the period reflects the estimated strip ratio of the ore component. Changes to the estimated
waste to ore ratio of a component of the ore body are accounted for prospectively from the date of change. Deferred
stripping capitalised is included in mine properties.
(b) Mine properties
Mine properties represent the accumulation of all exploration, evaluation and development expenditure incurred by
the Group in relation to areas of interest for which the technical feasibility and commercial viability of the extraction of
mineral resources are demonstrable.
When further development expenditure is incurred in respect of a mine property after the commencement of
production, such expenditure is carried forward as part of the mine property only when it is probable that the
additional future economic benefits associated with the expenditure will flow to the Group. Otherwise such
expenditure is classified as part of the cost of production. Mine properties are amortised on a units of production basis
over the economically recoverable resources of the mine concerned.
Underground development commenced in January 2019 and continued up to 30 June 2019. As commercial production
had not been achieved at period end, underground development expenditures continued being capitalised. Capitalised
costs included depreciation expenses related to assets being used in underground development operations.
Refer to note 16 for the Group’s accounting policy in relation to impairment of non-current assets.
Note 15. Non-current assets – biological assets
Biological assets comprise livestock acquired by Toongi Pastoral Company Pty Ltd as part of farming operations on the
surrounding land to the Dubbo Project mining lease.
Biological assets
2019
$’000
402
2018
$’000
526
Note 16. Non-current assets – Impairment of non-current assets
At each balance date, the Group reviews the carrying amounts of its non-current assets to determine whether there
is any indication that those assets have been subject to an impairment charge or reversal of impairment charge. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the
impairment charge or reversal. Where it is not possible to estimate the recoverable amount of an individual asset, the
Group estimates the recoverable amount of the cash-generating unit (CGU) to which the asset belongs. The Group
considers the relationship between its market capitalisation and its book value among other factors, when reviewing
for indicators for impairment. During the year and as at 30 June 2019, the market capitalisation of the Company was
below the book value of its net assets indicating a potential trigger for impairment of assets.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount
of the asset or CGU is reduced to its recoverable amount. An impairment charge is recognised immediately in the
statement of comprehensive income.
Where an impairment charge subsequently reverses, the carrying amount of the asset or CGU is increased to the
revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined
had no impairment charge been recognised for the asset or CGU in prior years. A reversal of an impairment charge is
recognised immediately in the statement of comprehensive income.
66
Alkane Resources Annual Report 2019 FINANCIAL REPORT
The recoverable amount of a CGU is the higher of its fair value less costs of disposing (FVLCD) and its value in use (VIU).
FVLCD is the best estimate of the amount obtainable from the sale of a CGU in an arm’s length transaction between
knowledgeable willing parties, less the costs of disposal. This estimate is determined on the basis of best available
market information taking into account specific conditions.
Gold cash generating unit
The key assumptions which are used by the Directors in determining the recoverable amount for the gold cash
generating unit were as follows as at 30 June 2019:
Assumptions
Gold price $A
Life of Mine
$1,700
Post-tax real discount rate
8%
Commodity prices are estimated with reference to analysis performed by an external party and are updated at least
once every six months, in-line with the Group’s reporting dates.
The Directors and management have considered and assessed reasonably possible changes for other key assumptions
and have not identified any instances that could cause the carrying amount of the Tomingley CGU to exceed its
recoverable amount.
The operational performance for the year was strong and above budget. Management are confident based on the
strong geological understanding of the deposit that there is significant value for underground operations. The final
investment decision on developing underground operations was made in September 2018, whilst open cut activities
ceased in January 2019. Underground development has progressed well during the current period and remains on
budget.
Note 17. Non-current assets – other financial assets
Security deposits
2019
$’000
8,417
2018
$’000
8,347
The above deposits are held by financial institutions or regulatory bodies as security for rehabilitation obligations as
required under the respective exploration and mining leases or as required under agreement totalling $8,417,000 for
the current period (2018: $8,347,000 backed by security deposits).
All interest bearing deposits are held in Australian dollars and therefore there is no exposure to foreign currency risk.
Please refer to note 26 for the Group’s exposure to interest rate risk. The fair value of other financial assets is equal to
its carrying value.
67
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 18.
Note 18. Current liabilities – trade and other payables
Trade payables
Other payables
2019
$’000
3,710
4,297
8,007
2018
$’000
3,953
5,346
9,299
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the
financial period which are unpaid. Current trade and other payables are unsecured and are usually paid within 30
days of recognition. Trade and other payables are presented in current liabilities unless payment is not due within 12
months from the reporting date.
The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their
short-term nature.
Note 19. Current liabilities – income tax provision
Provision for income tax
Note 20. Current liabilities – provisions
Employee benefits
Rehabilitation
Restructuring
(a) Provisions
2019
$’000
-
2019
$’000
2,202
1,591
645
4,438
2018
$’000
6,929
2018
$’000
3,302
5,249
2,651
11,202
Provisions are recognised when the Group has a present legal or constructive obligation, it is probable that an outflow
of resources will be required to settle the obligation, and the amount can be reliably estimated.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-
tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The
increase in the provision due to the passage of time is recognised in finance charges.
68
Alkane Resources Annual Report 2019 FINANCIAL REPORT
(b) Information about individual provisions and significant estimates
Employee benefits
The provision for employee benefits relates to the Group’s liability for long service leave and annual leave.
The current portion of this liability includes all of the accrued annual leave. The entire amount of the provision of
$1,301,000 (2018: $1,803,000) is presented as current, since the Group does not have an unconditional right to defer
settlement for any of these obligations. However, based on past experience, the Group does not expect all employees
to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect
leave that is not expected to be taken or paid within the next 12 months.
Current leave obligations expected to be settled after 12 months
646
2019
$’000
2018
$’000
257
The liability for long service leave not expected to vest within 12 months after the end of the period in which the
employees render the related service is recognised in the non-current provision for employee benefits and measured
at the present value of expected future payments to be made in respect of services provided up to the end of the
reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures
and periods of service. Expected future payments are discounted using market yields at the end of the reporting
period on corporate bonds with terms and currencies that match as closely as possible, the estimated future cash
outflows. Where the Group does not have an unconditional right to defer settlement for any annual or long service
leave owed, it is classified as a current provision regardless of when the Group expects to realise the provision.
Restructuring provision
The provision for restructuring relates to the Group’s liability for severance payments for the current open cut gold
mining operations.
The current provision represents restructuring amounts that are expected to be settled within 12 months of the end
of the period in which the employees render the related service in respect of employees’ services up to the reporting
date and are measured at the amounts expected to be paid when the liabilities are settled.
The liability for restructuring benefits not expected to vest within 12 months after the end of the period is recognised
in the non-current provision. Consideration is given to the expected employee turnover and other factors in
determining the value of the restructuring benefits. The non-current provision has not been discounted to present
value as the impact of discounting is not material.
Rehabilitation and mine closure
The Group has obligations to dismantle and remove certain items of property, plant and equipment and to restore and
rehabilitate the land on which they sit.
A provision is raised for the estimated cost of settling the rehabilitation and restoration obligations existing at balance
date, discounted to present value using an appropriate pre-tax discount rate.
Where the obligation is related to an item of property, plant and equipment, its cost includes the present value of the
estimated costs of dismantling and removing the asset and restoring the site on which it is located. Costs that relate to
obligations arising from waste created by the production process are recognised as production costs in the period in
which they arise.
The discounted value reflects a combination of management’s assessment of the nature and extent of the work
required, the future cost of performing the work required, the timing of cash flows and the discount rate. The increase
in the provision due to the passage of time of $330,000 (2018: $460,000) was recognised in finance charges in the
statement of comprehensive income.
69
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 20.
The provisions are reassessed at least annually. A change in any of the assumptions used to determine the provisions
could have a material impact on the carrying value of the provision.
(c) Movements in provisions
Movements in rehabilitation and mine closure provision during the financial year are set out below:
Rehabilitation and mine closure
Opening balance
Additional provision incurred
Expenditure during the year
Unwinding of discount
Change in estimate
2019
$’000
18,535
1,338
(5,909)
330
162
14,456
Movements in restructuring provision during the financial year are set out below:
Restructuring provision
Opening balance
Additional provision incurred
Redundancies paid
2019
$’000
2,694
321
(2,370)
645
Movements in employee benefits provision during the financial year are set out below:
2019
$’000
3,620
1,698
(2,922)
2,396
2019
$’000
194
12,865
-
13,059
Employee benefits provision
Opening balance
Additional provision incurred
Employee benefits paid
Note 21. Non-current liabilities – provisions
Employee benefits
Rehabilitation
Restructuring
Refer to note 20 for accounting policy on provisions.
70
2018
$’000
21,035
1,800
(7,517)
460
2,757
18,535
2018
$’000
2,965
142
(413)
2,694
2018
$’000
2,610
2,438
(1,428)
3,620
2018
$’000
318
13,286
43
13,647
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Note 22. Equity – issued capital
2019
Shares
2018
Shares
2019
$’000
2018
$’000
Ordinary shares – fully paid
506,096,222
506,096,222
220,111
220,160
Movements in ordinary share capital
Details
Balance
Shares issued on vesting of performance rights *
Share issue **
Less: Transaction costs arising on share issues
Deferred tax credit recognised directly into equity
Date
Shares
$’000
1 July 2017
505,215,669
219,948
570,553
310,000
-
-
199
102
(5)
(84)
220,160
(49)
220,111
Balance
30 June 2018
506,096,222
Less: Deferred tax credit recognised directly into equity
-
Balance
30 June 2019
506,096,222
* During the year no shares were issued (2018: 570,553 shares were issued on vesting of employee performance rights in
relation to long term incentives issued by the Company).
** During the year no shares were issued to key consultants of the Company (2018: 310,000 shares were issued).
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value
and the Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
Note 23. Equity – reserves
The following table shows a breakdown of the balance sheet line item ‘Reserves’ and the movements in these reserves
during the year. A description of the nature and purpose of each reserve is provided below the table.
2019
$’000
Financial assets at fair value through other comprehensive income
reserve
151
Hedging reserve - cash flow hedges
Share-based payments reserve
(780)
2,981
2,352
2018
$’000
-
-
2,116
2,116
Financial assets at fair value through other comprehensive income reserve
The cash flow hedge reserve is used to recognise the effective portion of gains or losses on derivatives that are
designated and qualify as cash flow hedges, as described in note 12. Amounts are subsequently either transferred to
the initial cost of inventory or reclassified to profit or loss as appropriate.
71
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 23.
Hedging reserve – cash flow hedges
The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is
determined to be an effective hedge.
Share-based payments reserve
The reserve is used to recognise the grant date fair value of shares issued to Directors and KMP, as well as the grant
date fair value of deferred rights granted but not yet vested.
Note 24. Equity – accumulated losses
Accumulated losses at the beginning of the financial year
Profit after income tax expense for the year
Accumulated losses at the end of the financial year
2019
$’000
(31,880)
23,293
(8,587)
2018
$’000
(56,351)
24,471
(31,880)
Note 25. Critical accounting judgements, estimates and assumptions
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom
equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting policies.
Carrying value of non-current assets
Non-current assets include capitalised exploration and evaluation expenditures and mine properties. The Group has
capitalised significant exploration and evaluation expenditure on the basis either that such expenditure is expected
to be recouped through future successful development (or alternatively sale) of the areas of interest concerned or
on the basis that it is not yet possible to assess whether it will be recouped and activities are planned to enable that
determination.
The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors,
including whether the Group decides to exploit the related lease itself, or, if not, whether it successfully recovers the
related exploration asset through sale. The future recoverability of mine properties is dependent on the generation of
sufficient future cash flows from operations (or alternately sale). Factors that could impact the future recoverability
of exploration and evaluation and mine properties include the level of reserves and resources, future technological
changes, costs of drilling and production, production rates, future legal changes (including changes to environmental
restoration obligations) and changes to commodity prices and exchange rates.
Estimates of recoverable quantities of resources and reserves also include assumptions requiring significant judgment
as detailed in the resource and reserve statements.
An impairment review is undertaken to determine whether any indicators of impairment are present. The Group has
not recorded an impairment charge or reversal against either the gold operations or rare metals cash generating units
in the current financial year. Refer to note 16 for details.
Depreciation of property, plant and equipment
Non-current assets include property, plant and equipment. The Group reviews the useful lives of depreciable assets
at each reporting date or when there is a change in the pattern in which the asset’s future economic benefits
are expected to be consumed, based on the expected utilisation of the assets. Depreciation and amortisation are
calculated using the units of production method based on ounces of gold produced.
72
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Rehabilitation and mine closure provisions
These provisions represent the discounted value of the present obligation to restore, dismantle and rehabilitate
certain items of property, plant and equipment and to rehabilitate exploration and mining leases. The discounted
value reflects a combination of management’s assessment of the nature and extent of the work required, the future
cost of performing the work required, the timing of cash flows and the discount rate. Changes to one or more of these
assumptions is likely to result in a change to the carrying value of the provision and the related asset or a change to
profit and loss in accordance with the Group’s accounting policy stated in note 20.
Net realisable value and classification of inventory
The Group’s assessment of the net realisable value and classification of its inventory requires the use of estimates,
including the estimation of the relevant future commodity or product price, future processing costs and the likely
timing of sale.
Share-based payments
The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value for share appreciation rights and performance rights
component tranche 1 is determined with the assistance of an external valuer. The number of performance rights
issued under the long-term incentive plan tranche 2 component are adjusted to reflect management’s assessment
of the probability of meeting the targets and service condition. The related assumptions are set out in note 35. The
accounting estimates and assumptions relating to equity settled share-based payments would have no impact on the
carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.
Provision for restructuring costs
Restructuring costs are payable when employment is terminated before the normal retirement date, or whenever
an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises restructuring costs
when it is demonstrably committed to either: terminating the employment of current employees according to a
detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made
to encourage voluntary redundancy. Significant judgement is required in determining the probability of retention of
employees. Refer note 20.
Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement
is required in determining the provision for income tax. There are many transactions and calculations undertaken
during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity
recognises liabilities for anticipated tax audit issues based on the consolidated entity’s current understanding of the tax
law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact
the current and deferred tax provisions in the period in which such determination is made.
In addition, the Group has recognised deferred tax assets relating to carried forward tax losses to the extent there are
sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority against which
the unused tax losses can be utilised. Utilisation of the tax losses also depends on the ability of the entity to satisfy
certain tests at the time the losses are recouped. Refer to note 5 for the current recognition of tax losses.
Exploration and evaluation costs
Exploration and evaluation costs have been capitalised on the basis that the consolidated entity will commence
commercial production in the future, from which time the costs will be amortised in proportion to the depletion of
73
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 25.
the mineral resources. Key judgements are applied in considering costs to be capitalised which includes determining
expenditures directly related to these activities and allocating overheads between those that are expensed and
capitalised. In addition, costs are only capitalised that are expected to be recovered either through successful
development or sale of the relevant mining interest. Factors that could impact the future commercial production at the
mine include the level of reserves and resources, future technology changes, which could impact the cost of mining,
future legal changes and changes in commodity prices.
Where economic recoverable reserves for an area of interest have been identified, and a decision to develop has
occurred, capitalised expenditure is classified as mine development.
To the extent that capitalised costs are determined not to be recoverable in the future, they will be written off in the
period in which the determination is made.
Note 26. Financial risk management
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and
interest rate risk), credit risk and liquidity risk. The consolidated entity’s overall risk management program focuses on
the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance
of the consolidated entity. The Group uses derivative financial instruments including gold forward and gold put option
contracts to mitigate certain risk exposures.
This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and
processes for measuring and managing risk, and the management of capital.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management
framework. Management monitors and manages the financial risks relating to the operations of the Group through
regular reviews of the risks and mitigating strategies.
(a) Market risk
(i) Foreign currency risk
The Group’s sales revenue for gold are largely denominated in US dollars and the majority of operating costs are
denominated in Australian dollars, hence the Group’s cash flow is significantly exposed to movement in the A$:US$
exchange rate. The Group mitigates this risk through the use of derivative instruments, including but not limited to
a combination of Australian dollar denominated gold forward contracts and put options to hedge a portion of future
gold sales.
The Australian dollar denominated gold forward contracts are entered into and continue to be held for the purpose of
physical delivery of gold bullion. As a result, the contracts are not recorded in the financial statements. Refer to notes
30 to 32 for further information.
(ii) Commodity price risk
The Group’s sales revenues are generated from the sale of gold. Accordingly, the Group’s revenues are exposed to
commodity price fluctuations, primarily gold. The Group mitigates this risk through the use of derivative instruments,
including but not limited to Australian dollar denominated gold forward contracts.
(iii) Interest rate risk
The Group’s main interest rate risk arises through its cash and cash equivalents and other financial assets held within
financial institutions. The Group minimises this risk by utilising fixed rate instruments where appropriate.
74
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Summarised market risk sensitivity analysis:
Carrying
amount
$’000
69,582
348
8,417
Financial assets
Cash and cash equivalents
Receivables*
Other financial assets
Financial liabilities
Trade and other payables
(8,007)
Total increase/(decrease)
Interest rate risk
Impact on profit/(loss) after tax
30 June 2019
30 June 2018
+100BP
$’000
-100BP
$’000
487
-
59
-
546
(487)
-
(59)
-
(546)
Carrying
amount
$’000
72,003
13
8,347
(9,299)
+100BP
$’000
-100BP
$’000
504
-
58
-
562
(504)
-
(58)
-
(562)
* The receivables balance excludes prepayments and tax balances
which do not meet the definition of financial assets and liabilities.
There is no exposure to foreign exchange risk or commodity price risk for the above financial assets and liabilities.
(b) Credit risk
The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade
receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are
considered representative across all customers of the consolidated entity based on recent sales experience, historical
collection rates and forward-looking information that is available.
In determining the recoverability of a trade or other receivable using the expected credit loss model, the Group
performs a risk analysis considering the type and age of the outstanding receivables, the creditworthiness of the
counterparty, contract provisions, letter of credit and timing of payment.
Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit
exposure to customers, including outstanding receivables and committed transactions.
(i) Risk management
The Group limits its exposure to credit risk in relation to cash and cash equivalents and other financial assets by only
utilising banks and financial institutions with acceptable credit ratings.
(ii) Credit quality
Tax receivables and prepayments do not meet the definition of financial assets. The Group assesses the credit quality
of the customer, taking into account its financial position, past experience and other factors.
75
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 26.
(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial liabilities as they fall due. The Group’s
approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet
its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation. The Board of Directors monitors liquidity levels on an ongoing basis.
The Group’s financial liabilities generally mature within three months, therefore the carrying amount equals the cash
flow required to settle the liability.
Note 27. Capital risk management
The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern, so that it
can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may return
capital to shareholders, pay dividends to shareholders, issue new shares or sell assets.
Note 28. Key management personnel disclosures
The aggregate compensation made to Directors and other members of KMP of the consolidated entity is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
2019
$’000
1,703,206
112,400
34,640
-
772,562
2,622,808
2018
$’000
1,947,075
117,797
211,539
125,000
739,091
3,140,502
Mr Wilkins is associated with DWCorporate, a company which provided company secretarial services to the Group
throughout the financial year ended 30 June 2019. This fee is disclosed as short-term employee benefits in the
remuneration report.
76
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Note 29. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by PricewaterhouseCoopers, the
auditor of the Company:
Audit services - PricewaterhouseCoopers
Audit or review of the financial statements
Other services - PricewaterhouseCoopers
Other advisory services
2019
$’000
174
61
235
2018
$’000
195
222
417
As part of final audit and review of the financial statements for the year ended 30 June 2018, a one off additional fee
of $28,500 (2018: $33,920) was approved by the Audit Committee and paid in the current financial year.
Note 30. Contingent assets
The Group has entered into forward gold sales contracts which are not accounted for on the balance sheet. A
contingent asset of $nil (2018: $233,000) existed at the balance date in the event that the contracts are not settled by
the physical delivery of gold. Refer to the contingent liability disclosure note 31 for more information.
Note 31. Contingent liabilities
The Group has entered into forward gold sales contracts which are not accounted for on the balance sheet. A
contingent liability of $4,939,000 (2018: contingent asset of $233,000) existed at the balance date in the event the
contracts are not settled by the physical delivery of gold. The movement from contingent asset to contingent liability is
due to the significant increase in the AUD gold price during the latter part of the 2019 financial year.
The Group has contingent liabilities estimated up to the value of $5,650,000 for the potential acquisition of several
parcels of land surrounding the Dubbo Project (30 June 2018: $5,650,000). The landholders have the right to require
subsidiary Australian Strategic Materials Ltd to acquire their property as provided for in the development consent
conditions for the Dubbo Project or under agreement with Australian Strategic Materials Ltd.
An additional contingent liability of $1,710,000 (US$1.2m contingency converted at 30 June 2019 spot rate of 0.7015)
existed at balance date relating to an agreement with South Korean company Ziron Technology to fund final stage
research and feasibility relating to a clean metal process for the conversion of metal oxide to metals of high marketable
purity. Several conditions precedent were outstanding at balance date and not fully under ASM’s control, resulting in
a possible future obligation. Subsequent to 30 June 2019 these conditions were satisfied and the payment has been
made.
77
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 32.
Note 32. Commitments
(a) Exploration and mining lease commitments
In order to maintain current rights of tenure to exploration and mining tenements, the Group will be required to outlay
the amounts disclosed in the below table. These amounts are discretionary, however if the expenditure commitments
are not met then the associated exploration and mining leases may be relinquished.
Within one year
(b) Non-cancellable operating leases
2019
$’000
2,377
2018
$’000
1,677
The Group leases various premises under operating leases. The leases have varying terms, escalation clauses and
renewal rights. On renewal, the terms of the leases are renegotiated.
Within one year
(c) Physical gold delivery commitments
2019
$’000
289
2018
$’000
413
As part of its risk management policy, the Group enters into derivatives including gold forward contracts and gold put
options to manage the gold price of a proportion of anticipated gold sales.
The gold forward sales contracts disclosed below did not meet the criteria of financial instruments for accounting
purposes on the basis that they met the normal purchase/sale exemption because physical gold would be delivered
into the contract. Accordingly, the contracts were accounted for as sale contracts with revenue recognised in the
period in which the gold commitment was met. The balances in the table below relate to the value of the contracts to
be delivered into by transfer of physical gold.
Gold for physical
delivery
Ounces
Crontracted gold
sale price per ounce
($)
Value of
commited sales
$’000
12,980
14,770
1,854
1,853
24,065
27,374
4,000
1,750
6,999
30 June 2019
Fixed forward contracts
Within one year
One to five years
30 June 2018
Fixed forward contracts
Within one year
(d) Capital commitments
Capital commitments committed for the year at the end of the reporting period but not recognised as liabilities
amounted to $833,000 (2018: $281,000).
78
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Note 33. Events after the reporting period
Following execution of a binding agreement between Alkane’s wholly owned subsidiary Australian Strategic Materials
(ASM) and South Korean technology company Zirconium Technology Corporation (Ziron Tech), ASM has made a
payment of US$1.2m to Ziron Tech in July 2019. This payment will fund the final stage of research and feasibility into
an environmentally superior and cost effective method of producing high purity metals compared to existing methods.
Refer to the ‘Dubbo Project’ section of the Review of operations for additional details.
On 2 August 2019, the Company executed a subscription agreement and an underwriting agreement with Genesis
Minerals Ltd (ASX: GMD) (Genesis) whereby the Company may invest up to $6m in Genesis by subscribing for shares
under an initial placement, participating in and underwriting an entitlement offer, and potentially by subscribing
for additional shares in a secondary placement that is conditional on Genesis shareholder approval. Genesis is an
Australian gold exploration and mine development company with high-quality projects located in Western Australia’s
premier gold districts.
No other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly
affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs
in future financial years.
Note 34. Related party transactions
Parent entity
Alkane Resources Ltd is the parent entity of the Group.
Subsidiaries
Interests in subsidiaries are set out in note 39.
Key management personnel
Disclosures relating to KMP are set out in note 28 and the remuneration report included in the Directors’ Report.
Transactions with other related parties
Nuclear IT, a Director related entity, provides information technology consulting services to the Group which includes
the coordination of the purchase of information technology hardware and software totalling $65,400 for the current
period (2018: $28,200). These terms are documented in a service level agreement and represent normal commercial
terms.
During the period nil fees (2018: $152,500) were paid to Mineral Administration Services (MAS) in which the former
Company Secretary of the Group, Ms K E Brown had a substantial financial interest.
During the period fees amounting to $169,400 (2018: $43,000) were paid to DWCorporate Pty Ltd in which the current
Company Secretary of the Group, Mr D Wilkins has a substantial financial interest. DWCorporate Pty Ltd provides
secretarial services to the group. Mr D Wilkins was appointed Company Secretary of the Group on 29 March 2018.
Related party payables
As at 30 June 2019, committee fees totalling $22,917 remained payable to the Group’s Chairman, Mr I J Gandel (2018:
$10,417).
Invoices totalling $16,500 were outstanding at the end of the reporting period in relation to transactions with related
party DWCorporate Pty Ltd, a company which provided company secretarial services to the Group during the current
period (2018: nil).
79
Alkane Resources Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 35.
Note 35. Share-based payments
Share-based compensation benefits are provided to employees via the Group’s incentive plans. The incentive plans
consist of short-term and long-term incentive plans for Executive Directors and other executives and the employee
share scheme for all other employees. Information relating to these plans is set out in the remuneration report and
below.
The fair value of rights granted under the short-term and long-term incentive plans is recognised as an employee
benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference
to the fair value of the rights granted, which includes any market performance conditions and the impact of any non-
vesting conditions but excludes the impact of any service and non-market performance vesting conditions.
Non-market vesting conditions and the impact of service conditions are included in assumptions about the number
of rights that are expected to vest. The total expense is recognised over the vesting period, which is the period
over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its
estimates of the number of rights that are expected to vest based on the non-market vesting and service conditions.
It recognises the impact of the revision to original estimates, if any, in the statement of comprehensive income, with a
corresponding adjustment to equity.
The initial estimate of fair value for market-based and non-vesting conditions is not subsequently adjusted for
differences between the number of rights granted and number of rights that vest.
When the rights are exercised, the appropriate amount of shares are transferred to the employee. The proceeds
received net of any directly attributable transaction costs are credited directly to equity.
Under the employee share scheme, shares issued by the Group to employees for no cash consideration vest
immediately on grant date. On this date, the market value of the shares issued is recognised as an employee benefits
expense with a corresponding increase in equity.
The fair value of deferred shares granted to employees for nil consideration under the employee share scheme is
recognised as an expense over the relevant service period, being the year to which the incentive relates and the
vesting period of the shares. The fair value is measured at the grant date of the shares and is recognised in equity
in the share-based payment reserve. The number of shares expected to vest is estimated based on the non-market
vesting conditions. The estimates are revised at the end of each reporting period and adjustments are recognised in
profit or loss and the share-based payment reserve.
80
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Executive Directors and other executives
The Company’s remuneration framework is set out in the remuneration report, including all details of the performance
rights and share appreciation rights plans, the associated performance hurdles and vesting criteria.
Participation in the plans is at the discretion of the Board of Directors and no individual has a contractual right to
participate in the plans or to receive any guaranteed benefits. Participation is currently restricted to senior executives
within the Group.
The determination of the number of rights that are to vest or be forfeited is made by the Remuneration Committee
after the statutory audit has been substantially completed. As such, the actual determination was made after the
balance date however details have been included in the tables below as the relevant performance period is the current
financial year.
The following tables illustrate the number and weighted average fair value of, and movements in, share rights during
the year.
2019
2018
Number of
share rights
Weighted
average
fair value $
Number of
share rights
Weighted
average
fair value $
Performance Rights
Outstanding at the beginning of the year
Issued during the year
Lapsed during the year
Outstanding at the end of the year
10,236,883
8,239,178
-
18,476,061
$0.26
$0.08
$0.00
$0.18
2,866,795
11,395,156
(4,025,068)
10,236,883
$0.23
$0.26
$0.24
$0.26
The number of performance rights to be granted is determined by the Remuneration Committee with reference to the
fair value of each performance right which is generally the volume weighted average price for the month preceding the
start of the performance period. This will differ from the fair value reported in the table above which is determined at
the time of grant.
2019
2018
Number of
share rights
Weighted
average
fair value $
Number of
share rights
Weighted
average
fair value $
Share Appreciation Rights
Outstanding at the beginning of the year
Lapsed during the year
Outstanding at the end of the year
-
-
-
$0.00
$0.00
$0.00
11,467,187
(11,467,187)
-
$0.08
$0.08
$0.00
The number of Share Appreciation Rights (SAR) to be granted is determined by the Remuneration Committee with
reference to the fair value of each SAR at the time performance targets are set. This will differ from the fair value
reported in the table above which is determined at the time of grant. All SARs lapsed in the prior period.
The performance rights which have non-market-based hurdle conditions have been valued using the
Black-Scholes-Merton model to estimate the fair value at valuation date.
The performance rights which have market-based hurdle conditions have been valued using a Monte Carlo
simulation-based model to test the likelihood of attaining the Total Shareholder Return hurdle. The Monte Carlo
model incorporates the impact of this market based condition on the fair value of the rights.
81
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 35.
The following table lists the inputs to the models used.
Grant date
Performance hurdle
Dividend
yield
%
Expected
stock
volatility
%
Risk free rate
%
Expected
life years
Weighted
average share
price at grant
date
$
11/10/2017
04/12/2017
18/10/2018
21/11/2018
Service condition
and market condition
Service condition
and market condition
Service condition
and market condition
Service condition
and market condition
-
-
-
-
70%
70%
66%
65%
2.08%
1.84%
2.14%
2.14%
2.90
2.75
2.95
2.86
0.25
0.24
0.22
0.22
Expenses arising from share-based payment transactions.
Performance rights
Other share issues to KMP
Note 36. Earnings per share
Profit after income tax attributable to the owners of Alkane
Resources Ltd
Basic earnings per share
Diluted earnings per share
2019
$’000
864,965
-
864,965
2019
$’000
23,293
Cents
4.6
4.5
2018
$’000
984,410
102,300
1,086,710
2018
$’000
24,471
Cents
4.8
4.8
Weighted average number of ordinary shares used in calculating
basic earnings per share
Adjustments for calculation of diluted earnings per share:
Number
Number
506,096,222
505,916,516
Performance rights
Weighted average number of ordinary shares used in
calculating diluted earnings per share
13,287,556
519,383,778
6,949,594
512,866,110
82
Alkane Resources Annual Report 2019 FINANCIAL REPORT
Note 37. Assets pledged as security
As at the date of this report $8,417,000 (2018: $8,347,000) in deposits have been provided as security. Refer note 17
for details.
On 21 December 2018, the working capital facility with Macquarie Bank Ltd was executed including the following
securities:
• a security agreement requiring Alkane Resources Ltd and Tomingley Gold Operations Pty Ltd to maintain minimum
cash deposit balances of A$3,000,000 and A$5,000,000 respectively; and
• a parental guarantee provided by Alkane Resources Ltd and Tomingley Holdings Pty Ltd.
No other assets were pledged as security in the year ended 30 June 2019 (2018: $nil).
Note 38. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of comprehensive income
Profit after income tax expense
Total comprehensive income
Balance sheet
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Financial assets at fair value through other comprehensive
income reserve
Share-based payments reserve
Accumulated losses
Total equity
2019
$’000
22,513
22,664
2019
$’000
11,655
202,024
2,108
5,203
220,111
151
2,981
(26,422)
196,821
Parent
2018
$’000
8,346
8,346
Parent
2018
$’000
13,844
184,326
8,554
10,985
220,160
-
2,116
(48,935)
173,341
83
Alkane Resources Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 38.
Determining the parent entity financial information
The financial information for the parent entity has been prepared on the same basis as the consolidated financial
statements, except as set out below.
(i) Tax consolidation legislation
Alkane Resources Ltd and its wholly owned Australian controlled entities have implemented the tax consolidation
legislation. Refer to note 5 for further details.
(ii) Share-based payments rights
The grant by the Company of rights to equity instruments to the employees of subsidiary undertakings in the Group
is treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received,
measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment
in subsidiary undertakings, with a corresponding credit to equity.
(iii) Investment in subsidiaries
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 (2018: $nil).
Note 39. Interests in subsidiaries
The Group’s subsidiaries at 30 June 2019 are set out below. Unless otherwise stated, they have share capital consisting
solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held equals the
voting rights held by the Group. The state of incorporation or registration is also their principal place of business.
Name
Australian Zirconia Holdings Pty Ltd
Australian Strategic Materials Ltd
Tomingley Holdings Pty Ltd
Tomingley Gold Operations Pty Ltd
Toongi Pastoral Company Pty Ltd
Ownership interest
Principal place of business /
State of incorporation
2019
%
Western Australia
Western Australia
New South Wales
New South Wales
New South Wales
100.00%
100.00%
100.00%
100.00%
100.00%
2018
%
100.00%
100.00%
100.00%
100.00%
100.00%
84
Alkane Resources Annual Report 2019
Note 40. Reconciliation of profit after income tax to net cash from operating activities
FINANCIAL REPORT
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Net loss on disposal of property, plant and equipment
Share-based payments
Non-cash finance charges
Exploration costs provided for or written off
Fair value adjustments to derivatives
Change in operating assets and liabilities:
Decrease in trade and other receivables
Decrease/(increase) in inventories
(Decrease)/increase in provision for income tax
(Decrease) in trade and other payables
Increase in deferred tax liabilities
(Decrease)/increase in other provisions
(Increase)/decrease in fair value of biological assets
Net cash from operating activities
2019
$’000
23,293
7,327
7
865
330
582
(1,481)
287
14,392
(6,929)
(2,452)
9,314
(9,075)
(244)
36,216
2018
$’000
24,471
38,283
2
1,087
460
188
-
194
(9,322)
6,845
(8,725)
-
847
203
54,533
Note 41. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in the
respective notes or below. These policies have been consistently applied to all the years presented, unless otherwise
stated.
(a) New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended accounting standards and interpretations issued by the
Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period.
Any new or amended accounting standards or interpretations that are not yet mandatory have not been early adopted.
The adoption of these accounting standards and interpretations did not have any impact on the amounts recognised in
prior periods and will also not affect the current or future periods.
(i) AASB 9 Financial Instruments
AASB 9 Financial Instruments addresses the classification, measurement and de-recognition of financial assets and
financial liabilities, introduces new rules for hedge accounting and new impairment model for financial assets. The
standard applies from 1 July 2018.
The Group has entered into gold forward and gold put option contracts to manage the gold price of a proportion of
anticipated sales of gold. The put options contracts meet the definition of a derivative financial instrument, however
the gold forward contracts do not meet the criteria of financial instruments for accounting purposes on the basis
85
Alkane Resources Annual Report 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 41.
that they qualify for the normal purchase/sale exemption because physical gold would be delivered into the contract.
Accordingly, the Group has concluded that the new guidance does not affect the classification and measurement of
these gold forward contracts.
From 1 July 2018, the Group classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through other comprehensive income, or through profit or
loss); and
• those to be measured at amortised cost.
The classification depends on the Group’s business model for managing financial assets and the contractual terms
of the cash flows. For investments in equity instruments that are not held for trading, the Group has made an
irrevocable election at the time of initial recognition to account for the equity investment at fair value through other
comprehensive income.
The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried
at amortised cost and fair value through other comprehensive income (FVOCI). The impairment methodology applied
depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies
the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial
recognition of the receivables.
(ii) Trade receivables
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected
loss allowance for all trade receivables. Other current receivables and prepayments were previously presented
together with trade receivables but are now presented as other financial assets at amortised cost (receivables) and
other current assets (prepayments) in the balance sheet, to reflect their different nature.
The Group completed a detailed assessment of its financial assets as at 1 July 2018. Most of the requirements in AASB
139 for classification and measurement of the group’s financial assets were carried forward in AASB 9. Hence, the
Group’s accounting policy for financial assets did not change except for the application of new impairment rules.
In determining the recoverability of a trade or other receivable using the expected credit loss model, the Group
performs a risk analysis considering the type and age of the outstanding receivables, the creditworthiness of the
counterparty, contract provisions, letter of credit and timing of payment.
The Group has applied the new rules retrospectively from 1 July 2018, and no material provision for credit losses was
required to be recognised in the current period ending 30 June 2019.
(iii) AASB 15 Revenue from contracts with customers
The AASB has issued a new standard for the recognition of revenue. This replaces AASB 118 which covers contracts for
goods and services and AASB 111 which covers construction contracts. The new standard is based on the principle that
revenue is recognised when control of a good or service transfers to a customer – so a notion of control replaces the
existing notion of risks and rewards. The standard permits a modified retrospective approach for the adoption. Under
this approach entities will recognise transitional adjustments in retained earnings on the date of application (1 July
2018) without restating the comparative period. They will only need to apply the new rules to contracts that are not
completed as of the date of initial application.
Adoption of the new standard has had neither an impact on the timing of recognition, nor on the measurement of
revenue in respect of the sale of goods.
Revenue from the sale of goods is recognised when the Group satisfies its performance obligations under its contract
with the customer, by transferring such goods to the customer’s control. Control is generally determined to be when
the customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good.
Bullion revenue is recognised at a point in time upon transfer of control to the customer.
The Group does not expect to have any contracts where the period between the transfer of the promised goods or
services to the customer and payment by the customer exceeds one year. Accordingly, the Group does not adjust
transaction prices for the time value of money.
86
Alkane Resources Annual Report 2019 FINANCIAL REPORT
(b) New or amended Accounting Standards and Interpretations not yet adopted
(i) AASB 16 Leases
The Group will adopt AASB 16 Leases from 1 July 2019. The standard replaces AASB 117 Leases and for lessees
eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of
low-value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial
position. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a
straight-line basis, while the lease liability is reduced by an allocation of each lease payment. In the earlier periods
of the lease, the expense associated with the lease under AASB 16 will be higher when compared to lease expenses
under AASB 117. For lessor accounting, the standard does not substantially change how a lessor accounts for leases.
The Group has elected to use the simplified transition approach as allowed under AASB 16 as well as apply the
following practical expedients permitted by the standard:
• reliance on previous assessments on whether leases are onerous;
• the accounting for operating leases with a remaining lease term less than 12 months as at 1 July 2019 as short-term
leases;
• the use of hindsight in determining the lease term where the contract contains options to extend or terminate the
lease.
The Group has reviewed its contracts that were in place at 1 July 2019 or have been entered into since and determined
that there are no long term operating leases. As a result, no impact on the current or prior reporting periods is
expected upon adoption of AASB 16.
There are no other standards that are yet effective and that would be expected to have a material impact on the entity
in its current or future reporting periods and on foreseeable future transactions.
(c) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards
and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001,
as appropriate for for-profit oriented entities. These financial statements also comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board (IASB).
(i) Historical cost convention
The financial statements have been prepared under the historical cost convention, except for certain financial assets
and liabilities which are measured at fair value.
(ii) Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The
areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant
to the financial statements, are disclosed in note 25.
(d) Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity
only. Supplementary information about the parent entity is disclosed in note 38.
87
Alkane Resources Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 41.
(e) Tax consolidated legislation
Alkane Resources Ltd and its wholly owned Australian controlled entities have implemented the tax consolidation
legislation.
The head entity, Alkane Resources Ltd, and the controlled entities in the Tax Consolidated Group account for their own
current and deferred tax amounts. These tax amounts are measured as if each entity in the Tax Consolidated Group
continues to be a stand-alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Alkane Resources Ltd also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled
entities in the Tax Consolidated Group.
The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate
Alkane Resources Ltd for any current tax payable assumed and are compensated by Alkane Resources Ltd for any
current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to
Alkane Resources Ltd under the tax consolidation legislation. The funding amounts are determined by reference to the
amounts recognised in the wholly owned entities financial statements.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current
amounts receivable from or payable to other entities in the Group.
(f) Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Alkane Resources Ltd
(‘Company’ or ‘parent entity’) as at 30 June 2019 and the results of all subsidiaries for the year then ended. Alkane
Resources Ltd and its subsidiaries together are referred to in these financial statements as the ‘consolidated entity’ or
the ‘Group’.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an
entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from
the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the consolidated entity.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the consolidated statement of
comprehensive income, statement of changes in equity and balance sheet respectively.
(g) Foreign currency translation
The financial statements are presented in Australian dollars, which is Alkane Resources Ltd.’s functional and
presentation currency.
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised in profit or loss.
88
Alkane Resources Annual Report 2019
FINANCIAL REPORT
(h) Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of realisation.
Cash flow hedges
Cash flow hedges are used to cover the consolidated entity’s exposure to variability in cash flows that is attributable
to particular risks associated with a recognised asset or liability or a firm commitment which could affect profit or
loss. The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income
through the cash flow hedges reserve in equity, whilst the ineffective portion is recognised in profit or loss. Amounts
taken to equity are transferred out of equity and included in the measurement of the hedged transaction when the
forecast transaction occurs.
Cash flow hedges are tested for effectiveness on a regular basis both retrospectively and prospectively to ensure that
each hedge is highly effective and continues to be designated as a cash flow hedge. If the forecast transaction is no
longer expected to occur, the amounts recognised in equity are transferred to profit or loss.
If the hedging instrument is sold, terminated, expires, exercised without replacement or rollover, or if the hedge
becomes ineffective and is no longer a designated hedge, the amounts previously recognised in equity remain in equity
until the forecast transaction occurs.
(i) Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of
the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently
measured at either amortised cost or fair value depending on their classification. Classification is determined based
on both the business model within which such assets are held and the contractual cash flow characteristics of the
financial asset unless, an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, its carrying value is written off.
(i) Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity investments which the consolidated
entity intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial
recognition.
(ii) Impairment of financial assets
The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either
measured at amortised cost or fair value through other comprehensive income. The measurement of the loss
allowance depends upon the consolidated entity’s assessment at the end of each reporting period as to whether
the financial instrument’s credit risk has increased significantly since initial recognition, based on reasonable and
supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month
expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses
that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become
credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on
the asset’s lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of
the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the
original effective interest rate.
For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised
within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss.
89
Alkane Resources Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS/NOTE 41.
(j) Impairment of non-financial assets
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses
are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the
initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future
cash flows of the financial asset or group of financial assets that can be reliably estimated.
(k) Goods and Services Tax (GST) and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as
part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the balance
sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax
authority.
(l) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares;
by
• the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements
in ordinary shares issued during the year and excluding treasury shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account:
• the profit attributable to owners of the Company, excluding any costs of servicing equity; and
• the weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
(m) Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with
that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
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Alkane Resources Annual Report 2019
FINANCIAL REPORT
In the Directors’ opinion:
• the financial statements and notes set out on pages 49 to 90 are in accordance with the Corporations Act 2001
including:
(a) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
(b) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of its
performance for the financial year ended on that date;
• the financial statements and notes also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 41 to the financial statements;
• there are reasonable grounds to believe that Alkane Resources Limited will be able to pay its debts as and when
they become due and payable.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors.
On behalf of the Directors
N Earner
Managing Director
Alkane Resources
30 August 2019
Perth
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Alkane Resources Annual Report 2019
INDEPENDENT AUDITOR’S REPORT
Independent auditor’s report
To the members of Alkane Resources Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Alkane Resources Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2019 and of its financial
performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
the consolidated balance sheet as at 30 June 2019
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial report
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to
our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
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Alkane Resources Annual Report 2019 FINANCIAL REPORT
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial report as a whole, taking into account the geographic and management structure of the
Group, its accounting processes and controls and the industry in which it operates.
The Group produces gold from its Tomingley Gold operations, located in New South Wales. The Group is
also currently undertaking exploration and evaluation activities at its Dubbo Project in New South Wales,
and other smaller exploration projects outside of the Tomingley Gold and Dubbo operations. The
accounting processes are structured around a group finance function at its head office in Perth. Our audit
procedures were mostly performed at Group head office, along with visiting the Tomingley Gold
operations.
Materiality
Audit scope
Key audit matters
● Our audit focused on where
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
● During the audit the
engagement team undertook
the majority of its audit work
at the Group’s head office in
Perth as well as visiting the
Tomingley Gold operations.
● Amongst other relevant topics,
we communicated the following
key audit matters to the Audit
and Risk Committee:
−
−
Estimate of rehabilitation
and mine closure provision
Carrying value of property,
plant and equipment
● These are further described in
the Key audit matters section of
our report.
● For the purpose of our audit
we used overall Group
materiality of $2.4m, which
represents approximately 1%
of the Group’s total assets.
● We applied this threshold,
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
our audit procedures and to
evaluate the effect of
misstatements on the financial
report as a whole.
● We chose Group total assets
because, in our view, it is the
benchmark against which the
performance of the Group is
most commonly measured.
● We selected 1% based on our
professional judgement noting
that it is also within the range
of commonly acceptable asset
related thresholds.
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Alkane Resources Annual Report 2019 INDEPENDENT AUDITOR’S REPORT
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report for the current period. The key audit matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. Further, any commentary on the outcomes of a particular audit
procedure is made in that context.
Key audit matter
How our audit addressed the key audit matter
Estimate of rehabilitation and mine closure
provision
(Refer to rehabilitation and mine closure provision in
notes 20, 21 and Critical accounting judgements,
estimates and assumptions in note 25 to the financial
statements) [Current $1.6m; Non Current $12.9m]
As a result of its mining and processing activities at
Tomingley Gold, the Group incurs obligations to
restore and rehabilitate the environment disturbed by
its operations. Rehabilitation activities are governed by
a combination of legislative requirements and the
Group’s policies.
We focussed on this matter as determining the
provision for rehabilitation and mine closure requires
the use of significant estimates and judgements by the
Group in assessing the magnitude, nature and extent of
rehabilitation work to be performed, and in
determining:
●
the expected future cost of performing the
work
● the timing of when the rehabilitation activities
are expected to take place, and
● economic assumptions such as the discount
rate used to discount this estimate to net
present value.
We performed the following procedures, amongst
others:
●
●
●
●
●
Evaluated the Group’s rehabilitation and
restoration cost forecasts including the
process by which they were developed and
tested the mathematical accuracy of the
calculation of the discounted cash flows
prepared by the Group.
Evaluated the competence of experts used by
the Group in calculating the nature and extent
of rehabilitation work required.
Compared prior year planned rehabilitation
activities and estimated cost to the actual
activity and cost incurred for rehabilitation
work performed during the year and
investigated significant differences.
Benchmarked key market related assumptions
including inflation rates and discount rates
against external market data.
Evaluated the basis for cost estimations made
by management, in light of the budgets and
forecasts approved by the Board, and tested
on a sample basis the provision amount to
comparable data sourced from external
parties and management’s experts.
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Alkane Resources Annual Report 2019 FINANCIAL REPORT
Key audit matter
How our audit addressed the key audit matter
Carrying value of property, plant and
equipment
(Refer to Impairment of non-current assets in note 16
to the financial statements)
The Group has two cash generating units (CGUs), with
impairment indicators existing at the Tomingley Gold
CGU at 30 June 2019. An impairment assessment was
therefore performed for this CGU.
We focused on this matter because:
● the valuation techniques used to assess
impairment are complex and involve a large
number of inputs into the valuation models
● calculating the value of the CGU involves
significant judgement in estimating:
-
-
forecast gold prices, production
quantities and production costs, and
the discount rate used.
We performed the following procedures, amongst
others:
● Tested the logical integrity and mathematical
accuracy of the model used for calculation of
value of the CGU.
● Compared forecast production, operating and
capital cash outflows used in the valuation
model to the most up-to-date budgets and
business plans formally approved by the
Board.
● Evaluated the Group's historical ability to
forecast future cash flows by comparing
budgets with reported actual results for the
past three years.
● Compared total forecast production quantities
over the remaining life of the mine to the
Group’s latest published mineral reserves and
resources statement.
● Evaluated the competence and qualifications
of experts engaged to determine mineral
reserves and resources of the Group. We also
performed a reconciliation of reserves and
resources from 30 June 2018 to 30 June 2019
taking into account production in the period.
● Compared the forecast gold price and
discount rates used by the Group to those
based on independent market data.
● Assessed the Group’s consideration of the
sensitivity to a change in key assumptions that
either individually or collectively would be
required for assets to be impaired and
considered the likelihood of such a movement
in those key assumptions arising.
● Evaluated the adequacy of the financial
statement disclosures, including those
regarding the key estimates and assumptions,
in light of the requirements of Australian
Accounting Standards.
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Alkane Resources Annual Report 2019 INDEPENDENT AUDITOR’S REPORT
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report for the year ended 30 June 2019, but does not include the financial report
and our auditor’s report thereon. Prior to the date of this auditor's report, the other information we
obtained included the Directors' report and the Corporate directory. We expect the remaining other
information to be made available to us after the date of this auditor's report.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to the directors and use our professional judgement
to determine the appropriate action to take.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
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Alkane Resources Annual Report 2019 FINANCIAL REPORT
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 33 to 43 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the remuneration report of Alkane Resources Limited for the year ended 30 June 2019
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the remuneration
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
Matters relating to the electronic presentation of the audited financial
report
This auditor’s report relates to the financial report of Alkane Resources Limited for the year ended 30
June 2019 included on Alkane Resources Limited's web site. The directors of the Company are
responsible for the integrity of Alkane Resources Limited's web site. We have not been engaged to report
on the integrity of this web site. The auditor’s report refers only to the financial report named above. It
does not provide an opinion on any other information which may have been hyperlinked to/from the
financial report. If users of this report are concerned with the inherent risks arising from electronic data
communications they are advised to refer to the hard copy of the audited financial report to confirm the
information included in the audited financial report presented on this web site.
PricewaterhouseCoopers
Helen Bathurst
Partner
Perth
30 August 2019
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97
Alkane Resources Annual Report 2019 SHAREHOLDER INFORMATION
Shareholder Information
Additional information required by Australian Securities Exchange Ltd and not shown elsewhere in this report is as
follows. The information is current as at 11 September 2019.
Distribution of Equity Securities
Analysis of numbers of equity security holders by size of holding:
Ordinary shares
Number of
holders
Number of
shares
1-1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
718
2,096
1,172
2,289
457
6,732
The number of equity security holders holding less than a marketable parcel of securities are:
603
Twenty Largest Shareholders
The names of the 20 largest holders of quoted ordinary shares are:
280,211
6,235,473
9,236,568
77,164,547
413,179,423
506,096,222
165,348
1
2
3
4
5
6
7
8
9
ABBOTSLEIGH PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
ABBOTSLEIGH PTY LTD
CHAPELGREEN PTY LTD
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